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lanagement Information 
System Benefits to 


January 25, 1979 
Albuquerque, New Mexico 



Conference Summary 

Sponsored by: 

The Institute for Medicaid Management 

Health Care Financing Administration 

Department of Health, Education, and Welfare 

JANUARY 23-25, 1979 






Richard Heim 

Director, Medicaid Bureau 

HCFA, Washington, D. C. 

Larry Ingram 

Secretary, Department of 

Human Resources 
Santa Fe , New Mexico 

KEYNOTE ADDRESS : MMIS - New Direct ions 16 

Leonard Schaeffer 


HCFA, Washington, D. C. 


Lessons Learned from Our Activities 

in Project Integrity 
Thomas Morris 
Inspector General 
HEW, Washington, D. C. 

A Funny Thing Happened on the 

Way to Certification 
John Hall 

MMIS Project Director 

Department of Social and Rehabilitation Services 
Topeka, Kansas 

The Need for Planning and Organizing 

for the Management of New Technology 

in a Public Agency 
Bruce Kozlowski 
Director, MMIS Analysis and Development 

Office of Support Services 
Department of Social Services 
Lansing, Michigan 

(continued) PAGE 

The Role of Management Systems in 

Combating Fraud, Abuse, and Waste 
Ronald Schwartz 
Deputy Assistant Inspector General 

for the Office of Health Care and 

Systems Review 
HEW, Washington, D. C. 

An Administrative Approach to 

Utilization Review 
Joseph Chiaramonte, M.D. 
Assistant to the Director 
Medical Assistance Program 
Nassau County, New York 

Medicare/Medicaid Integration Projects: 

States and Systems Impact 

Lawrence Levinson 

Director, Institute for Medicaid Management 

HCFA, Washington, D. C. 

MMIS Benefits and Evaluation 

Robert Nakamoto 


Division of Information Systems 

MMB/HCFA/HEW, Washington, D. C. 


SUR As a Management Tool 

Utah's Approach to Physician Utilization 
Management Control of Fraud, Abuse, and Waste 
Future Requirements 


The Medicaid Bureau, Office of State Operations, Division of Informa- 
tion Systems sponsored a three day conference January 23-25, 1979 in 
Albuquerque, New Mexico. One hundred fifty-seven people attended the 
conference, representing thirty two States and the District of Columbia, 
ten HCFA Regional Offices, several HEW Washington offices, and twenty two 
private sector firms. 

The purpose of the conference was to share successful management experi- 
ences (both State and Federal), resulting from effective use of management 
information systems. These experiences were shared through presentations 
by State and Federal staffs. The presentations stimulated interest and 
reactions as demonstrated by the questions and comments at the conclusion 
of each session. 

Topics covered during the conference were pertinent, comprehensive, and 
generated enthusiasm for further formal and informal discussions. Exclus- 
ive of Federal moderators, there were a total of thirty speakers and 
panelists representing eighteen States, the Federal government, and five 
private sector firms. The conference, based on the overall reactions from 
attendees and participants, was a marked success. 

The high point of the conference was a major policy address by Leonard 
Schaeffer, HCFA Administrator. Mr. Schaeffer outlined new directions for 
the Medicaid program and for MMIS. He stressed the need for more effec- 
tive program management, citing MMIS as the best tool, and said program- 
oriented performance standards would be developed to measure results. He 
felt that program improvement is a State/Federal responsibility requiring 
flexibility and creativity on both parts. 

The Inspector General's presentation on the lessons learned from Project 
Integrity and on the importance of MMIS as a tool to control fraud and 
abuse was very well received. There was significant interest generated in 
the establishment of an MMIS National Technical Advisory Group (NTAG). 
Major issues raised during the conference included: 

1. Performance standards for approval and reapproval based upon effective 
utilization of management data provided by MMIS. 

2. Commitment for Federal assistance to States in justifying resources 
for improved management . 

3. Alternatives to the SUR subsystems. 

4. Incremental and/or partial MMIS approvals. 

5. Larger FFP match for smaller States to develop, design, and implement 
management systems. 

6. Implementation of Section 17 (setting up State fraud, abuse, and waste 
units) has created an additional burden for program management in 
State agencies . 

7. Increased emphasis needed on quality of health care. 

8. Standardized definition of terms used in Medicaid/Medicare . 

9. Tape-to-tape processing concerns: 

a. Original documents are needed for fraud and abuse prosecutions. 

b. Less manual scrutiny decreases chances for finding non-edit 

c. Possibility of increased access to confidential data by unauthor- 
ized individuals. 

This report is a compilation of major presentations made at the conference 
and also includes a summarized agenda and a list of participants. 

January 23 - 25, 1979 




Robert Silva, Acting Director 
Office of State Operations 
Medicaid Bureau, HCFA 
DHEW, Washington, D.C. 

Introduction and Purpose 


A Funny Thing Happened on 
the Way to Certification 

The Need for Planning and 
Organizing for the Manage- 
ment of New Technology in 
a Public Agency 

The Role of Management Sys- 
tems in Combating Fraud, 
Abuse, and Waste 

SUR as a Management Tool 

Richard Heim, Director 
Medicaid Bureau, HCFA 
DHEW, Washington, D.C. 

Larry Ingram, Secretary 
Department of Human Resources 
Santa Fe, New Mexico 

John Hall 

MMIS Project Director 
Department of Social and 
Rehabilitation Services 
Topeka, Kansas 

Bruce Kozlowski 

Director, MMIS 

Analysis and Development 

Office of Support Services 
Department of Social Services 
Lansing, Michigan 

Ronald Schwartz, Deputy Assistant 
Inspector General for the Office of 
Health Care and Systems Review 

DHEW, Washington, D.C. 

Richard Heim, Moderator 

State Panel: 

Denise Chuckovich 
Bureau of Medical Assistance 
Division of Welfare 
Department of Social Services 
Boise, Idaho 



*Texas : Medicaid Eligibility Determin- 
ation in Texas 

State Panel, cont. 

Mary Awbrey, Chief 
Systems Development 

Department of Human 

Austin, Texas 

New Mexico: BPST: Bill Processing 

System Test. A technique 
for system audit through 
the computer. 

Georgia: MMIS Benefits 

Nebraska: In-house Development and Use 
of MMIS Data Base 

California: CURES: Cost and Utilization 
Analysis of Statistical and 
Management Information 

Richard Atkinson, Administrator 

Medical Assistance 
Department of Medical Assistance 
Santa Fe, New Mexico 

Larry Lawson 

Computer Systems Specialist 
Medicaid Regional Office 
Region VI, Dallas, Texas 

Robert Melvin, Director 
Information Systems 
Department of Medical 

Atlanta, Georgia 

Donald Hogg, Chief 
Medical Services Division 
Department of Public 

Lincoln, Nebraska 

Maureen Murray, Medical Data 

Processing Consultant 
Medical Services Division 
Department of Public Welfare 
Lincoln, Nebraska 

John Charles, Unit Manager 
Practitioner Unit 
Medical Services Division 
Department of Public Welfare 
Lincoln, Nebraska 

Kay Moser, Chief 
Health Statistics 
Department of Health Services 
Sacramento, California 

*State presentations were given twice 




State Panel Cont'd 

SUR as a Management Tool 

Herbert Alfasso 
Bureau of Medical Assistance 
Department of Social Services 
Albany, New York 

Linda Stella 

SUR Division 

Department of Public Welfare 

St. Paul, Minnesota 

Central Office Resource: 
Daniel Boyle, Corrective Action 

Office of State Operations 
Medicaid Bureau/HCFA 
DHEW, Washington, D.C. 


David Far re 11 

Assistant Executive Director 
New Mexico PSRO 
Albuquerque, New Mexico 

PACE: Utah's Approach to 
Physician Utilization 

James Healy, Manager of 

Ambulatory Review 
New Mexico PSRO 
Albuquerque, New Mexico 

Sharon Wasek 

Systems Coordinator 

Office of Health Care Financing 

Department of Social Services 

Salt Lake City, Utah 

James Cannon 

Assistant Executive Director 

Utah PSRO 

Salt Lake City, Utah 

Data and Information Necessary for 
Management Control of Fraud, Abuse, 
and Waste 

Bruce Ferguson, Chief 
Office of Budget Services 
Department of Health and Social 

Olympia, Washington 

John Kasonic, President 
Kasonic and Associates 
Seattle, Washington 



New York: Third Party Liability Recovery 
or How New York Recouped 
Millions of Dollars Last Year 

State Panel, Cont'd. 

Charles Christopher, Deputy 

Management Information Systems 
New York Department of Social 

Albany, New York 

The repeat session by 

New York was given by: 

Lloyd Moses, Director 

NYS Medicaid Systems and MMIS 

New York Department of Social 

Albany, New York 

Minnesota: SUR II: Simplified Reporting 
for Surveillance and 

Robert Baird, Assistant 

Income Maintenance 
Department of Public Welfare 
St. Paul, Minnesota 

New Jersey: MERS: Medical Exception 

Reporting System. A system 
tool for detecting fraud 
and abuse 

Linda Stella 

Surveillance and Utilization 

Review Division 
Department of Public Health 
St. Paul, Minnesota 

Joseph Piazza, Assistant 

Division of Medical Assistance 

and Health Services 
Trenton, New Jersey 

Robert Yoder, Director 
Health Systems Management 
Optimum Systems, Inc. 
Santa Clara, California 

Lessons Learned From Our Activities in 
Project Integrity 

Thomas Morris 
Inspector General 
DHEW, Washington, D. C. 



MMIS - New Directions 

An Administrative Approach to Utilization 

Medicare/Medicaid Integration Projects 
Status and Systems Impact 

Future Requirements 

MMIS Benefits and Evaluation 

Leonard Schaeffer 


Health Care Financing 

DHEW, Washington, D. C. 

Joseph Chiaramonte, M.D. 
Assistant to the Director 
Medical Assistance Program 
Nassau County, New York 

Lawrence Levinson, Deputy 

Office of State Operations 
HCFA/DHEW, Washington, D. C. 

William Hickman, Director 
Division of Analysis and 

Evaluation, Medicaid Bureau 
HCFA/DHEW, Washington, D. C. 

Al Dobson, Director 

Division of Beneficiary Studies 

Office of Policy, Planning 

and Research, HCFA 
DHEW, Washington, D. C. 

Charles McDermott, Comptroller 
Oklahoma Department of Insti- 
tutional and Rehabilitation 
Oklahoma City, Oklahoma 

Robert Nakamoto, Director 
Division of Information Systems 
Medicaid Bureau/HCFA 
DHEW, Washington, D. C. 


Richard Heim, Director 
Medicaid Bureau, HCFA 
Washington, D. C. 

Since becoming the Medicaid Director in HEW, in June of last year, 
I've made a number of speeches around the country, and in almost all 
of them, I begin by telling the group how pleased I am to be there. I 
suspect that there is a certain note of insincerity about those words. 
This morning, however, I can tell you very candidly that, indeed, I am 
pleased to be here; and I am pleased for a number of reasons, most impor- 
tant of which I suspect is that New Mexico is my home — my residence has 
been in Albuquerque for the past 30 years, and so I'm always glad to come 
back home. 

I'm also pleased to welcome you to a State that has experienced 
a number of firsts. Some of the people on the Eastern Seaboard don't like 
to admit it but New Mexico was the site of the first European settlement 
in the continental United States. It is also the site of the first 
capital in the continental United States, and for those of you who are 
religious-minded, the first church in the United States. Although some 
people don't like to admit this, it was also the site of the first bar and 
the first brothel. And as many of you know, New Mexico was the site of 
the first nuclear explosion back in 1945, which brought us into our 
nuclear age. So, it's probably very appropriate that New Mexico was the 
first to be certified as a Medicaid Management Information System State. 

New Mexico was the first, but, as of right now, we have 23 States 
with certified Medicaid Management Information Systems, at design, 
development and installation costs of some $35 million and an annualized 
operational cost of more than $100 million. By the end of this year, 
1979, we expect the number of certified States to increase to 33. The 
important thing is the States certified will cover approximately 79% of 
the program dollars in Medicaid, and by the end of 1980, we expect to have 
more than 41 certified systems covering 95% of the program dollars. 

I'm also pleased to be here because on Thursday, the Administra- 
tor of the Health Care Financing Administration, Leonard Schaeffer, my 
immediate boss in HEW, will be here, and will be making a major policy 
speech, announcing some new national directions for MMIS. Also on 
Thursday, the Inspector General of the Department of Health, Education and 
Welfare will be here to share with you how critically important he thinks 
MMIS is to serve as a tool in the eradication of fraud, abuse and waste in 
the Medicaid program. 

Recently, at the Inspector General's recommendation, an inter-agency 
task force on Medicaid Management Information Systems was set up in HEW 
and I was appointed chairman of this task force. The purpose of the 
group, to describe it succinctly, is to take a good, hard, in-depth 
look at where we are now in MMIS. Our job is to take a look at what 
presently is, to come up with some recommendations of what should be, to 
line up some goals and objectives for what MMIS should be as a major tool 
for managing Medicaid, and then, lastly, and very importantly, to develop 
the action steps to get to where we want to be. Some of this will be 
discussed by Mr. Schaeffer on Thursday. 

As chairman of this task force, I am very pleased to be here at 
this meeting, and I intend to spend the entire three days here listening 
to you, particularly the State people, as you share your experiences of 
what you have done to make MMIS a more effective tool in your State. I 
have long felt that the most effective technical assistance in Medicaid, 
and other State-Federal programs, is the assistance that one State can 
give another. I also feel very strongly that it's not only what you can 
give to one another, but what you can give to us in the Federal Govern- 
ment. In my role as chairman of this task force, I'm looking to you to 
give us some very needed technical assistance. So call it reverse techni- 
cal assistance if you will. 

It's not only what can be learned from you at this meeting, but I 
think we need to have an on-going form of communications, not only with 
this task force, but with the Medicaid Bureau. So one of the results of 
this meeting that we hope to achieve is to set up a small group that we're 
going to initially call, "The National Technical Advisory Group" — a 
group of State people knowledgeable about MMIS to work with the task force 
and with the Office of State Operations of the Medicaid Bureau in making 
MMIS a more effective tool for all of us. 

Tomorrow, after the regular program, we should like to invite as 
many of the State people as possible who will be interested to meet with 
us in a planning session to talk about setting up this National Technical 
Advisory Group. Some people have suggested that we drop the word "techni- 
cal" and just call it a national advisory group, and then we could call it 
by the acronym "NAG", and that, perhaps, is appropriate, because that's 
exactly what we would expect you to do. 

Lastly, I am pleased to be here in my capacity as the Director 
of Medicaid, a program that is presently serving some 23 million persons 
— the children, the elderly, the poor and the sick in 53 jurisdictions — 
49 States, the District of Columbia and three territories. 

I'm sure you have been reading and hearing, as I have, about every- 
thing that's wrong with Medicaid. There are a lot of things wrong 
with Medicaid; we've got a lot of problems in the administration of 
Medicaid, and I'm sure you are as aware, as I, of the mood of the country 
today, the mood of the American people, on how their tax monies are being 
spent . 

I think we owe it to the people we serve; I think we owe it to the 
American taxpayers to manage our programs as efficiently, as economically, 
and as effectively as possible. I've long felt that the tool for improved 
management of this very important, but very difficult, very politically 
sensitive program is an efficient and effective and operational Medicaid 
Management Information System. Therefore, I look at this meeting with a 
great degree of anticipation and expectation to learn from you, how we can 
better use this tool to serve the poor, the elderly and the sick and the 
dependent citizens in such a way that the American taxpayer will not 


object to the spending of their dollars for this program. 

If, as an IBM saying goes, the future is a moving target, I think 
that MMIS is our weapon, and I look to this meeting and to subsequent 
meetings with State people to help all of us improve our aim. 

Thank you very much. I really look forward to a very productive 



Larry Ingram, Secretary 
Department of Human Resources 
Sante Fe, N. M. 


Welcome to the conference relating to Medicaid management. Dick's 
association with New Mexico goes back a good way, and we're very proud of 
the achievements that he left behind, and the legacy that he has shown us. 
In fact, in the office that I have, Dick, there's still a shelf or two of 
old reports and pieces of legislation with your name in them, and your 
notes and stars beside certain legislators, and question marks, and some 
of those other items. 

Our legislature just started, and we have somewhat of a turmoil 
in the House side. The leadership changed after eight years to a new 
coalition group. I did notice in the paper this morning that "The House 
Ends Patronage Hiring," and right under that "Senate Bill Limits State 
Employment." I don't know where that's going to lead us or what we're 
going into, but it's going to be an interesting session this time, I 
think, in New Mexico. 

The Governor does extend his welcome to you and we're sure that, 
because Dick is involved at the level he is, the location in Albuquerque 
didn't have anything to do with his participation. We were sure that it 
was done on an independent basis by staff members who realize the import- 
ance of being in a central area. 

Looking at you, I'm reminded of the fellow who passed on and went up 
to the pearly gates and went to Saint Peter. They have a scoring system 
on making an entrance into the pearly gates; and he began enumerat- 
ing his many achievements: Kiwanis Club Member — 10 points; Boy Scout, 
Eagle Scout — 5 points; 4-H Member — 3 points. He kept enumerating all 
of his achievements and he came up little short. He got about 70 and that 
was about as far as he could go on a ranking of 100; and he began to sweat 
and bleed a little bit. St. Peter said, "Well now, what else have you 
done? Surely there must be something else." And he said, "Well, I just 
finished being a Medicaid fiscal manager out in New Mexico." And St. 
Peter said, "Well, come on in. You've suffered enough." 

We are especially pleased here that you all have picked this area, 
because New Mexico was the first State in the nation to receive certifica- 
tion of its Medicaid Management Information System, which was developed, 
tested and implemented by the Dykewood Corporation, the State's previous 
Medicaid fiscal agent. 

We also received certification of the Medicaid Management Information 
System installed by our current fiscal agent, the Electronic Data System 
Federal. I've had an opportunity to review the agenda, as you have, and I 
think you're going to have some interesting conversations and exchange of 
ideas in the next few days, and I hope that some of our people are able to 
interact with you. 

In New Mexico, Medicaid is one of the largest expenditure programs 
administered by the Department of Human Services and one of the larger 
percentiles for the whole State budget. I'm sure that in other States, 


Medicaid expenditures represent a substantial amount of the budget for 
human service programs. In the current year, our Medicaid program is 
adequately funded; however, I realize that the program will require aggres- 
sive monitoring and effective management in order to maintain future 

I might point out that because of the foresight of Richard, we're now 
in a position to effectively address many of the problems associated in 
managing the Medicaid program. I say this because it was during his term 
as executive director of the old program in the State, that the first 
system which we operated was certified as meeting the Medicaid Management 
Information criteria. We are pleased and privileged to have Dick return 
to New Mexico and hope that he will continue to visit us on many other 
occasions . 

We've all observed the effects of the spiraling inflation, and we 
know that Medicaid expenditures will apparently continue to increase. 
Those of you that are involved with State legislatures know the pressures 
that are being placed upon us. They have a tendency to want to cut down, 
very early on, whenever they call for tax reductions and tax decreases and 
they begin looking at where they can slash, and they begin looking in the 
human service area. It usually ends up — what do you do whenever you 
begin cutting back on your bucks? You're either going to have to increase 
efficiency and eliminate your waste, or you're going to have to start 
cutting back on services. 

I think that we also see a trend towards a more conservative spending 
pattern by all elected officials around the nation, and this apparent 
conflict on the spiraling increase of Medicaid costs and the conservative 
trend demonstrates a need for us to maintain management systems, not only 
for the purpose of receiving additional Federal funds for the cost of 
claims processed, but also so that management can be provided the neces- 
sary information to adequately administer and control its Medicaid expendi- 
tures. And all of you here today are directly interested in Medicaid 
management or you wouldn't be here, and I hope there's much we can learn 
from one another. 

Here in New Mexico, we'd like to think that we've developed a 
successful program and we're looking forward to learning more about the 
benefits to be derived from the Medicaid Management Information System. 
We know that your participation, whether it be on the Federal level or as 
a State representative, will be productive. 

I hope some cross-fertilization of ideas can take place, the end 
result which will help all of us, and serve to contribute to this concept 
thoughout the nation. Although the problems involved in managing an 
effective Medicaid program are a real challenge, I feel real confidence 
that this conference will provide all of us with the information and 
insight that will be helpful. As a layman, and a former businessman, and a 
politician, I think we're going to have to be extremely conscious, in 


the next four to five years, of where we're going with regard to our 
Medicaid and Medicare programs. I think we're going to have to be 
extremely conscious about the controlling of the costs. I've been 
very active with our health systems agency in New Mexico, and I'm afraid 
that if we don't watch ourself, we're going to be looking more and more 
towards socialized medicine from womb to tomb, and it's an area that a lot 
of us are not comfortable with. I think we're creating our own problem, 
and I think it behooves us to call on our colleagues in the medical field 
and constantly remind them of this fact that is galloping upon us. 

I think we're faced with a real dichotomy — you're looking at a 
somewhat conservative nation, or a trend towards a little more moderation 
than we've had in the past, and yet we're not able to control one of the 
higher costs of government. I think what it's going to force us to do is 
end up with total control and not just partial control, that we've seen, 
down through the years. We do welcome you. 


MMIS - New Directions 

Leonard D. Schaeffer 
Health Care Financing Administration 
HEW, Washington, D. C. 


I am now functioning as the Administrator of HCFA, and I'm glad to 
have an opportunity to talk to you. I'm familiar with some people in this 
end of government, but not with all of you. You may have read some of the 
things in the health press, particularly, about my background. I don't 
have a health profession background, and I have been introduced, courtesy 
of some of the gossip sheets in Washington, at least, as a Califano 

I met Joe Califano for the first time 11 months ago. At that time, I 
had a good job with a good salary and a good future. And now I'm Adminis- 
trator of HCFA. So, as far as I'm concerned, Joe owes me, not vice versa. 
If you've gotten the point of view, it's a little bit inaccurate. I am 
not a lawyer, I'm proud to say, so you don't have to fear that either. 

And, actually, my background, both at Arthur Anderson, and when I 
first joined State government, is in data processing and management 

I'm returning to the health care field, and I am very interested and 
excited about that because it's an opportunity, I think, to work for an 
idea, and work for people who need help, and to play a part in our society 
that gives one a sense of satisfaction that I think is greater than in 
some other endeavors I've been involved in. And I'm very happy to be back 
in this end of the business. 

It also gives you a sense of frustration and a sense of exhaustion 
sometimes in terms of all the roadblocks that you seem to find in your 
way. But on a personal basis, I'm very happy to be back in the health 
care field. 

I also am reminded that I now have the job, and am physically in the 
office of a guy named Bob Fulton who, at one time, was the Administrator 
of SRS. You may not be familiar with him. Something like six years ago, 
just about this time, I came to Washington and told him how screwed up the 
SRS was, why his disallowance didn't make any sense, and on behalf of the 
people and the Governor of Illinois, I was going to tear him to shreads. 

Now, I have his job, and I have been waiting for the Illinois delega- 
tion to come in and read my speech to me. 

Very briefly, in case you don't know what the Health Care Financing 
Administration is, it is really five programs. We're responsible for the 
Medicare program, for the Medicaid program. We're Standards and Certifi- 
cation, which is basically the group that establishes the conditions of 
participation for institutions in those two programs. We fund and are 
responsible for the PSRO program, and we have an organization called the 
OPI, the Office of Program Integrity. It does not do criminal work, but 
does all the other kinds of work. And they are very involved in, on a 
regional basis, much of the fraud and abuse work that, I think, you're 
familiar with. 


From a statistical point of view, though, we're an enormous organi- 
zation. We spend, in terms of benefits, $40 billion a year on Medicare and 
Medicaid. There are about 45 million people enrolled in those two pro- 
grams. Those programs are growing, particularly the Medicare side of our 
business. The greying of America is basically the growing of the Medicare 
program. We spend, every work day, $200 million. I wish we knew where 
every penny of it went, but we are doing it. 

We do this, however — and this is the thing that brings me here 
today, in the sense of our responsibility — with a total of 4,500 employ- 
ees. We are involved in big business. We're not involved in big govern- 
ment. HCFA is about as small an organization as you can find with a major 
Federal responsibility. The reason that we're so small is we depend on 
our partners. In the Medicare program, that's carriers and intermediar- 
ies. In the PSRO program, it's the physicians in this country, and in the 
Medicaid program, it's the States. 

If you take a look at the funding for administrative costs, you find 
the Federal government spends $100 million a year on this program. We 
give the States over $700 million a year for administrative costs, and we 
pay out in benefits about $11 billion. 

So most of this program is a State-operated endeavor in terms of 
funding. And when people talk about big government -- and I'm sure you've 
heard it in your States — and they talk about Federal government not 
doing its job, unfortunately, they are not talking about the Feds, they're 
talking about all of us, particularly in the Medicaid program. 

From a functional point of view, what HCFA does is very simple. We 
write policy, we write the procedures, we determine what standards insti- 
tutions and providers have to meet. We implement those programs through 
third parties. We support about 60,000 full-time equivalents in States, 
carriers and intermediaries, and then we monitor implementation. 

I think the functions are pretty straightforward. The question is, 
what are we trying to achieve? I think that's similar to yours. We are 
attempting to fund a delivery of appropriate health care services to 
eligible individuals in a timely and cost-effective manner. A piece of 
cake, right? Easy, no problems. 

We are faced, particularly in the Medicaid program, with trying to 
provide services to a group of people who are clearly in need of those 
services , but for whom our society has not come to any great consensus as 
to what our responsibility is. 

We're trying to provide those services in an economic environment, 
the health care environment, where the traditional laws of supply and 
demand don't work, where the consumer doesn't control consumption, where 
no one is really spending their own money to purchase services, and where, 
basically, the physician controls utilization. Seventy percent of hospi- 


tal cost is under the control of the physicians. 

So I think we're faced with a difficult social problem, and we're 
faced with an extremely complex system in which we're trying to fund 
appropriate care. One of the things that strikes me whenever I have to 
testify on the Hill, or whenever I'm called to account for government's 
alleged failure to function as well as private industry, is that the 
problems that we're dealing with are a hell of a lot more complicated than 
most of the problems that are faced by private industry, and that our 
chances for success are probably much lower, given that complexity, than 
many other endeavors . 

Unfortunately, however, we're dealing with public funds. Our ac- 
countability for those funds is paramount if we're going to continue to 
serve our clientele. 

That accountability is really what I want to talk about today. It's 
my feeling, based on my experience in Washington of only about a year, 
that our programs, HCFA, but, particularly Medicaid, are at risk. They 
are seriously vulnerable to changes in the political winds. The reasons 
are pretty straightforward, and you're aware of them. 

There's a general public perception that big government has failed. 
You see it reflected in all the polls, you see it reflected in your mail, 
I would think, and certainly in mine. 

That's a function of two things: one, very unrealistic expectations, 
in the '60s and '70s when these programs were created, but also real 
failures. We have not been able to make it work as well as we said we 
would . 

Second, there's also a public perception that government is bloated 
and mismanaged, that even if the problems are worth attacking, the manage- 
ment is so poor that it's the wrong vehicle to try to help people. You 
see that in the press all the time, fraud, abuse and waste. I was reading 
a magazine about a month ago, and there was an article on fraud, abuse, 
and waste, and they didn't even bother to justify or to describe the kind 
of waste in HEW. They just took it for granted: the most wasteful 
agency in the Federal government. 

Well, when they're talking about HEW and Medicaid, they're talking 
about States. That's where the money is. 

I think there's also, in the political climate right now, a very real 
and growing perception that this country doesn't have the kind of money it 
had to throw at these problems. Productivity in this country is almost 
flat, the increase in government revenues in the Federal sector and in 
most States is really a function of inflation. We're in an era of limits; 
we cannot tolerate the kind of massive increase in expenditures we had in 
earlier years in this program. 


When you put those things together, I think what you come up with is 
a series of reasons that have resulted in the conservative trend that 
we're seeing in Washington and I assume you're seeing in your State 
capitals. There's a loss of faith in government's ability to solve 
problems. I think the people are unwilling to pay higher taxes, either 
because they feel they can't afford them, themselves, or because they feel 
they won't get a result for it. I think there's an unwillingness, even, 
on the part of many people, to maintain their current commitment to 
our programs. I think we've seen that in Proposition 13 and other things 
across the country. 

What I come down to, then, is if we're going to continue to provide 
adequate services, or attempt to provide adequate services, to our recipi- 
ents, we've got to do a couple of things. We've got to increase the 
efficiency of our programs. We've got to use every buck we have, because 
there aren't going to be many new bucks, to make sure that they're turned 
into service delivery. We've got to eliminate whatever fraud, abuse and 
waste — I think it's mostly waste — that actually occurs so we can make 
those dollars available for programs. 

We've got to do that, though, not just to get the money focused, 
because I think everybody is trying to do that, and has been for awhile, 
but to restore public confidence in these programs. Without that confi- 
dence, they're going to wither, and when they do, it's going to be the 
recipients, the people who need help, who are going to suffer. I don't 
think that you would be in this business if you didn't have some concern 
for those people. 

By changing how we operate, by improving our actual operations, the 
reality of our situation, we can both serve our recipients and change the 
public perception. The changes I'm talking about, I think, are not all 
that radical or dramatic. They are better management, efficiency, and 
going about doing our business in a responsible manner. 

If we can improve management, I think it'll help us not only in the 
two places I've already mentioned, but in the third area, which I am 
particularly vulnerable to these days, responding to legislative requests. 

I assume that, if not you, the people with whom you work, trot up to 
the State legislator, like I did in Illinois, on a fairly regular basis, 
and try to explain those headlines that appear at least twice a year in 
the biggest newspaper in the State about Medicaid mills and about all 
kinds of unattractive occurrences. If we can't improve our management 
practices, if we can't respond to those legislative demands, I think the 
programs will be severely curtailed. 

We need the information that describes who we're serving, what 
services are being delivered to those people, and how much we're paying. 
We need to improve claims processing. We've got to have more timely 
payment, and more accurate payment. We need to be able to describe 


patterns of utilization. We need to make sure that everything we're 
paying for is a covered service. We need to make sure that third party 
liability has been explored. We need to improve linkages with other 
programs to assist their efforts and our own. Allegedly, every State 
Medicaid program is plugged into a Section 17 unit where that unit exists. 

We need to work cooperatively with PSROs, with the Medicare carriers 
and intermediaries, and with other States. I've been involved fairly 
recently in some of these residency disputes, duplication of services 
issues. All of those things, I think, are things that we're sensitive to, 
and that we're concerned about. 

The question is, how to get it done, in an era where the limits in 
the program are translated into limits on your staff and on your resour- 
ces. Given the volume of transactions in the program, I think there's 
only one answer, and that's the MMIS system, which is why I'm here today. 
It's the best tool we have for improving management, and, in many cases, 
it's the only way that we can do the things I mentioned earlier on. 

Before we can use it as well as we'd like, though, I think we have to 
get away from the idea that MMIS is simply a claims processing system. 
What it is is a vehicle to obtain the information we need to manage the 
program. What I think we need in most States, as we certainly need in the 
Medicare program, is a management control system. 

We've got to know what's happening this month so that we can take 
action to correct it next month; not historical statistics, not a method 
for getting the paper moved more rapidly, but a way of finding out what's 
going on, and a method for helping us make the thing work better, more 
efficiently, more effective, as soon as possible. We've got to look at 
the results that can be achieved through the information MMIS gives us, 
not simply a throughput. 

There are a number of States, I think, that have done very well. We 
have some outstanding examples we try to cite whenever we can. In New 
York City, they've cut down the time for paying claims from 90 days to 10 
days. In Georgia, they're using a tape-to-tape formatting, which allows 
the State to increase processing speed, reduce errors, and according to 
the folks in Georgia, to save over $5 1/2 million, which is almost two 
percent of their program costs. In Michigan, partial automation of a 
third party liability system has identified about 140,000 Medicaid bene- 
ficiaries who may also have third party coverage. 

Those are all, as isolated activities, laudable, commendable, good 
work. But they tend to be isolated, they tend to be one area in one 
State, one kind of improvement. We don't have — or haven't managed to 
achieve over time — a model that allows us to say, this system, this 
combination of software and hardware enables us to manage the whole 
program, to do all the things we really want to do. 


I think the reasons are historic, and there are a combination of 
State and Federal problems. From what I can see, as a former State 
employee battling the Feds, and now a Federal employee trying to explain 
away the past, the tendency on both parts has been, in the MMIS area, to 
be very process-oriented, very system-designed, system specif iciation, 
data-processing-oriented, instead of management -oriented. 

I can remember, when I was in Illinois, some of the original hoops 
that the guys there had to jump through. And it seemed to me the Feds 
were, and have been for quite a while, much more concerned with adherence 
to design specifications than to the impact, the results of implementing 
an MMIS system. 

I think we've worried you to death reviewing your plans for what 
you're going to do, but really haven't looked at what you've accomplished 
in any kind of rigorous way. We have not established standards for 
performance in terms of impact on program. We've got some technical 
standards that are pretty good that have prevented anybody from moving 
beyond 1972 technology, we've got some ideas about claims processing. But 
I don't really think we've looked at outcome, at program performance. 

We haven't encouraged greater solutions; we haven't encouraged the 
use of new technology or more sophisticated techniques, and we haven't 
really done the job of transferring knowledge and experience gained in one 
State to another State, although I would like to put in a plug for the 
Institute for Medicaid Management. From what I have seen and heard from 
people I've talked to in a variety of States, it's one of the things that 
we're doing that has been successful in that it has facilitated one State 
helping another State. And that seems to be the best way for this 
cross-fertilization. I want to talk about that later. 

We need your help in transferring experiences rather than the Federal 
government trying to learn all there is to learn, and then shoot it out 
and tell States how to operate. 

States and the Federal government have to reorient our efforts toward 
outcomes, toward results; get off process, get off data processing for its 
own sake, and look at the impact we can have on our programs. 

Our certification reviews, for instance, have been devoted to assess- 
ing the capacity of the system to process claims and to generate the 
required reports; there is no test as to whether anybody is looking at the 
reports, no test of whether anybody has done anything with the reports. 

After we certify, we walk away from a State's MMIS. We haven't 
attempted to judge, once a system is operational, whether the system has 
any impact on improved program performance. We haven't asked the kind of 
questions that I think are important. I think they're important to you: 
have we achieved more timely claims payment? Has that improved provider 
satisfaction? Has that resulted in increased participation? Have im- 


proved beneficiary files reduced eligibility error rates? Has the addi- 
tional information on other sources of insurance increased third party 
collections, or have we even gotten to the point — as I'm told they have 
in Michigan — where we don't even pay without first checking for the 
availability of private insurance? 

We haven't asked, for instance, whether more children are being 
tracked through EPSDT programs. We haven't asked some of the questions 
that we ought to be asking about quality. We haven't asked if improved 
reimbursement systems are reducing the rate of inflation. 

I think Medicare and Medicaid, by virtue of the way they reimburse, 
promote inflationary pressures. We haven't asked if duplicate payments 
and other erroneous payments are being eliminated or reduced. We haven't 
looked at whether increased numbers of actionable referrals are being made 
to investigative units. We haven't asked a whole series of questions that 
are the important questions. And I think we have to begin asking them. 
And that's why I'm here. 

Beginning today, in terms of public discussion, we're going to begin 
to refocus our efforts in the MMIS field from the process orientation to 
outcome-oriented performance standards. Our success in establishing those 
standards, and in achieving them, will depend on State participation in 
developing the standards themselves. 

I'm counting on you as individuals and this organization for that 
participation. And I'd like to take a series of steps aimed at getting 
the participation and your assistance. 

As Dick Heim mentioned on Tuesday, we've asked you to establish a 
National Technical Advisory Group as the primary vehicle, your involvement 
in the process of setting standards and developing techniques for evaluat- 
ing performance against those standards. I'm very glad to hear from Dick 
that you've already responded to that invitation and that a steering 
committee has been formed. 

We are going to establish output-oriented program-related standards. 
We'll do that, though, only after consultation with the States and only 
prospectively. We will attempt to make sure there is lead time for 
implementation. Ninety percent matching funds will be available for any 
systems changes that are required to meet the standards. Standards, as 
they're developed, will be proposed to the States no more frequently than 
once a year. There will not be change orders coming down the road once a 
month . 

We'll try, wherever possible, to be sensitive to the constraints 
imposed on you by your own budget process. One of the problems, of 
course, is the way the Federal fiscal year now works. It basically screws 
everybody up. 


In addition to establishing outcome-oriented standards, we're going 
to change the way that we evaluate and certify MMIS systems. Our primary 
evaluation will not be the technical adherence to the existing system 
design, rather, it will be performance against outcome standards. 

We'll permit, and, I hope, encourage, creative approaches in the use 
of advanced technology and new designs. We'll certify individual MMIS 
modules, provided they have measurable impact on outcomes. We've done 
that in New York City and in Texas, and we'll encourage the development of 
individual modules for things like EPSDT, and its hoped for successor, 


However, we will re-evaluate the case of those MMIS systems already 
up, and evaluate, in the case of the new ones, performance against stand- 
ards on a regular and continuing basis. By re-evaluation, I mean recerti- 
fication for 75 percent matching funds. We just can't afford to walk away 
from a system once it's been certified. 

We'll periodically check a system's adherence to those standards and 
those standards may increase in the sense that we may be expecting better 
performance over time. We will be looking at them on a regular basis. 

What does that mean in terms of your State? If you're MMIS current- 
ly, or once the standards are in place, and after you've had a chance to 
make what changes you feel are necessary to meet them, if you can perform 
up to the standards level, you'll continue to be certified and receive the 
75 percent match. 

If the system doesn't do what everybody said it would do — and you 
must remember, I was consultant for Arthur Anderson for several years and 
I remember selling systems — trust me, in three years, everything will be 
okay. Right? And in two and a half, the job's over and you go on to the 
next one . 

If those systems don't measure up to standards, even if they're 
already certified, and even if the MMIS meets the technical standards, 
then the State will lose certification and will revert to eligibility for 
the standard administrative match of 50 percent. 

Now, that's not going to happen tomorrow; it's not going to happen 
next month. But once we get the standards developed, that will be the 
leverage that we will apply in terms of achieving the goals that we've 
jointly set. 

The importance of setting the goals jointly, though, is paramount to 
me. Medicaid is run by the States, obviously. My responsibility, and 
Dick's responsibility, though, is to the Congress. We've got $12 billion 
in this operation, and we're assuming that you are performing consistent 
with the policies set by Congress and by HCFA. Developing these stand- 
ards, I hope, will be an appealing idea. It's not meant as threatening, 


and it's not meant to be unilateral action. 

We'll use the National Technical Advisory Group to help establish 
those standards. I can guarantee you that we will listen to them. We'll 
be looking for claims processing standards, and we'll also be looking for 
program impact standards. 

We'll, again, try to develop jointly an evaluation methodology on 
what basis we will judge performance. And we'll also ask that group to 
try to help us on this interstate transfer business. I really believe 
that it's only by State-by-State cooperation that we can spread the good 
news . 

We'll also look to some of the lessons that we've learned from 
contractors and from the Medicare program. We have a contractual rela- 
tionship with carriers and intermediaries. As a result, we have a great 
deal of experience regarding contractor performance. I think we have a 
less complex world in the Medicare program. So much of it is not directly 
trans ferrable . 

But the idea of contractor productivity and contractor performance is 
not a new one to the Medicare program, and is certainly not a new one to 
some of those contractors who can be very helpful to us. 

We will depend on the ingenuity of the States and the vendors with 
whom you work; there are lots of good ideas, lots of smart people. We'll 
try to improve our monitoring so that we're sensitive not just to the 
aggregate statistics, but to problems that are unique to individual 
States, which is what Medicare attempts to do. 

We'll also be taking a look at what's called beneficiary and provider 
services. What should we expect a State to do? And what should we expect 
to fund in terms of dealing with the recipient community and with the 
provider community? 

In terms of our support of your efforts, we will be highlighting 
State achievements whenever we can. In Congressional hearings, we'll be 
pointing out the States that have done good jobs to the degree we're aware 
of them, in press releases, in statements by the Secretary. I don't know 
if many of you saw it, but the Secretary went to New York City to announce 
the certification of New York City's MMIS system, and was joined by 
the Governor and the Mayor there in terms of expressing his confidence in 
the system and in the approach New York City was taking. We would like to 
do similar things in other States where there are significant achievements. 

As an off-the-record remark, I think both the elected officials who 
might be involved in this type of activity and the Secretary get a great 
deal of enjoyment out of announcing successful management initiatives. 

We'll also be borrowing seme of the techniques that were used in the 


establishment of the Section 17 fraud and abuse units. That is, where we 
can, we will send letters from the Secretary or from me to governors of 
States where we can assist in getting support for MMIS or for fraud and 
abuse units or for modules that you'd like to add; where we can demon- 
strate that they're cost-effective investments, we'll attempt to support 
you in those efforts. 

To make this thing work, obviously, we need your commitment to about 
three things. I assume that it's all there. If it's not, I hope it can 
be developed. One is a commitment to manage the programs. There isn't 
enough money, there isn't enough confidence from the public, and there 
isn't enough time, given the pressures on State legislatures and the 
Congress, to allow us to act as simple stewards of a program. We've got 
to run them efficiently and effectively. 

That means we've got to take on the management role. We need your 
commitment, secondly, to be creative. These problems are incredibly 
complex. If they were easy, we would have solved them a long time 

We need your commitment to work with us, as individuals and as a 
group. I'm personally a very strong believer in strong interest groups, 
where they're responsible and where they speak for their membership. It's 
much easier for the Federal government to negotiate with a group that 
knows its business and represents its members than it is to try to nego- 
tiate with 50 States. I would, therefore, encourage you to build up this 
organization or similar organizations that can speak for you to us. 

On our side, you'll just have to wait and see. The traditional 
attitude in the Civil Service to governors, to secretaries, and now, I 
understand, to administrators of the Health Care Financing Administration, 
is, "We've seen them come, we've seen them go, and they don't really make 
any difference." 

You'll have to wait and see, as I know you will. All I can say is, 
as far as I'm concerned, there is no other way to deal with either Medi- 
care or Medicaid than to have sophisticated, automated management control 
systems. They cannot be managed any other way. It's just that simple. 

My faith in those systems, when intelligent human beings have de- 
signed and run them, is fairly high. Beyond that, I'm probably the only 
person with a job like the one I have now who knows anything about data 
processing. And I have done quite a bit of selling for this idea. So if 
you do wait and see, I think you will see support coming out of HEW. 

I hope that today will be the beginning of a relationship that says 
we are all committed to those three things. I hope that I'll be seeing 
you again, whenever I can, and that you feel free to contact the people in 
the Medicaid Bureau and many of the people who are here from HCFA today 
for assistance. 


I appreciate your taking this time to listen to me, and I know that 
some of the things I propose are going to cause some problems in the near 
future. If we work together, we can solve most of those problems, and in 
the long term, I think we'll make everybody's job a bit easier. 

The thing that sticks in my mind about all of this is that if we 
fail, it'll be people who really need our help that will get hurt. If we 
succeed, we can do a hell of a lot for those folks. So it's incumbent on 
us — I think it's imperative — to be successful. 

If you have any questions, I'll be glad to answer them. 

Questions and Answers 

MR. WONG: Derek Wong, from Idaho. The total expenditure of MMIS is 
almost 3 1/2 percent to 4 percent of the total Medicaid program in Idaho. 
This would not happen in a bigger State. I believe, in a very large 
State, percentage-wise, it could be only one-tenth of a percent. Whenever 
you make systems changes, regardless of whether it's a bigger State or 
small State, it requires the same cost. There's an old Chinese saying 
that, "Although a bird is small, it has all the essential organs; stomach, 
heart, everything, you name it — essential organs. You have to have 

Now, my question is, since we have a formula to calculate the Federal 
Medicaid assistance program percentage, can we do the same thing for the 
75% match, like, maybe, for Idaho, you give 90 percent rather than 75 
percent . 

I think I have a lot of problems explaining to the legislature why we 
increased this much money last year to meet certain reporting standards. 
They don't look from the standpoint of program savings, they look from the 
standpoint of percentage-wise; how much you over-utilize. 

MR. SCHAEFFER: I think the question is would it be possible to 
provide different matching rates for different size States? That does not 
have as much appeal as you might think when you're talking to the Federal 
Congress. It's not something I've really ever considered. 

I think the other side of it, though, is much more realistic, 
which is the cost benefit associated with the burden that's placed on a 
given State, and perhaps, for some States, some of the reporting require- 
ments may not be appropriate. 

We're taking a look, for instance, in hospital cost containment, at 
the difference between the hospitals under 100 beds and hospitals over 100 
beds. We've never looked at States that way, but we obviously could from 
a cost benefit point of view. 


Personally -- and this is not very popular in Washington -- it 
seems to me that, operationally, all States are not alike, and we should- 
n't necessarily treat them alike. The problem becomes — when you try to 
make those differences and those differences are translated into funding 
— you find out that every single State has two Senators, and each one 
wants the same amount for that State; that every single State does have 
representatives in the Congress and they are very reluctant to give 
more money, either in absolute dollars or on a percentage basis, to a 
given State. 

But I think the way to go would be to take a look at the reporting 
requirements and what the cost benefit is. But, again, the cost benefit 
has got to be analyzed in terms of the program, not in terms of the 
computer capability. If it really costs a tremendous amount of money to 
do something in a given State, and it doesn't have the payback, then maybe 
we won't do it in that State. 

I can't think of too many examples of that. I suppose it's possible, 
and we could take a look at it, but I wouldn't look for a higher match, as 
a short answer. I just don't see it. Take a look at your legislature and 
try to explain to them there are bigger and larger counties; "Could we 
give more money to one county and less money to another county?" That 
isn't going to fly. I think it's the other side we should take a look 

MR. DAVIDSON: My name is Dave Davidson, from Alaska. I was going to 
chime in on Derek's comment. In smaller States — and this has been 
especially true in Alaska in the year and a half that I've been there — 
there is a lack of appreciation on the part of State legislatures, with 
the fact that each State in the Medicaid program has basic minimum re- 
quirements that they have to meet, and that, in order to fulfill those 
requirements, you have to have staff to do the work. 

In Alaska, there has been difficulty in trying to convey that to the 
legislature in order to get enough funding, and, actually, enough inter- 
est, in the program to do some of the things that are needed to clean up 
the problems. And so I think, along that line, if there is some commit- 
ment on your part to assist smaller States with that particular problem, 
it would be appreciated. 

MR. SCHAEFFER: Well, I think you're raising two kinds of problems 
which I didn't respond to in the first question. In terms of our ability 
to be of assistance, this corrective action program and some of the 
technical assistance ideas that we have would be available to States, 
large and small. 

In some States that have mature systems and sophisticated systems, 
there really isn't that much that the Federal government can do. In fact, 
I assume we would be thrown out of Michigan for even attempting to offer 
advice. So, obviously, that kind of technical assistance would be more 


available, or as available, to smaller States who would make more use of 

In terms of support, with your legislature or with your governor, as 
I said, we have sent letters to governors regarding the Section 17 units, 
in fact, we have sent governors a letter saying, "You haven't applied, can 
we help you?", or saying, "You have applied. The application wasn't good 
enough. We'll come out and help you reapply"; or finally saying, "You 
applied, you got in, congratualtions . We'll come out and help you set up 
the unit." 

We can apply that kind of support to the kind of requests that you 
have. I think, further, where you've got something that really has a 
cost-benefit association, we can draw public attention to it. And the 
Secretary has done that in some States. 

MR. DAVIDSON: I know, particularly in Alaska, the comment that I've 
gotten in the past when talking to Federal people about coming in and 
actually assisting us with the legislature — I guess you could call it 
lobbying, and there's been a real hesitancy, or at least there is some 
policy about not doing that. I feel if the program really is going to be 
a partnership, that the participation has to go all the way down the 

MR. SCHAEFFER: Well, I think there's a very fine line there. We can 
offer expert testimony, we can help you prepare the documentation, we can 
do whatever is necessary to make the objective argument. Anything we can 
do to help you make your case, we will try to do. 

MR. ALLEN: Paul Allen, from Michigan. I participated in the past 
two years in three seminars of the National Council of State Legislators 
in Seattle, in Boston, and in Denver. There were small States represented 
at every one of those, and Keith Weikel, at two of those three seminars, 
made the point very strongly with several hundred legislators that he felt 
there wasn't enough money being spent by the small States on this process. 
I think if you reinforce that, through the National Council of State 
Legislators, we might be able to make this point on a continuing basis. 

MR. SCHAEFFER: The success of those kinds of efforts are based on 
your ability to impact programs. If what you want is a 168 versus a 158, 
or if what you want is more disc drives or an online system, that all 
sounds good to some of us as professionals in the field, but that really 
is meaningless to a State legislator. What they want is results; they 
want to see recoveries. They want to see cost go down or performance go 
up. They'd like to see more kids in the EPSDT program, if that's pos- 
sible. They'd like to see those doctors off their backs, complaining 
about bills that are six months old. 

If you can provide an impact on the quality of the program, I think 
you'll get support, and you may be able to get the legislature's support, 


but it has to be real. It just doesn't fly to say the Federal government 
has come up with a six-volume set of standards, and in order to turn those 
standards into a system, I need $1.2 million — which is what they've been 
costing on the average — to do the programming for a Federally-designed 
book. It isn't going to fly. It's got to have some real impact. 

MR. COX: I'm Wally Cox, with the Division for Medical Assistance in 
Kentucky. I think you've indicated that, in the future, there might be 
the possibility of certification of modules if they contribute to enhanced 
performance of the system. Could you be a little more specific on what a 
module might be? Is it a certain subset, so to speak, of the Blue Books, 
or might it be something innovative and new that would enhance the system? 

MR. SCHAEFFER: I think it could be described as both. You could 
bring up part of the system and not all of it, and be able to demonstrate 
that it's cost effective as of the point in time you brought it up, and we 
could agree to certify that part of it at that time. 

It also could involve more innovative ways of going about getting 
some of the results that we would like to get. With third party liabil- 
ity, there might be ways that we could trade information with insurance 
companies or with Medicare carriers and intermediaries. 

There might be some opportunities for improving eligibility — or 
reducing eligibility errors — if we were able to do some work with the 
Welfare Department in your State. 

My point, I think, is that a rigid insistence on implementing all of 
those books, for its own sake, is not terribly meaningful; that there are 
other ways of getting about accomplishing the goals of reducing costs 
consistent with high quality programs. 

What we want is the good program and the low cost, not the book 
turned into software. I think that's the point. Also, given the long 
lead time with some of these things, we ought to be funding some of them a 
little bit earlier. 


Lessons Learned from Our 
Activities in Project Integrity 

Thomas Morris 

Inspector General 

HEW, Washington, D.C. 


It's really a pleasure to come to meet with a group like this. I 
recall so well two years ago, in March of '77, a few of us, who were then 
not quite ready to go to work as the IG, went to Denver and met with a 
group very similar to this — perhaps the same group — and learned an 
awful lot during those three days . 

At that meeting we had a dream which we talked to some of you about; 
we called it Project Integrity. And at that time we had no idea it would 
begin to roll as quickly as it did. But it was as early as a month later 
that Secretary Califano — when we told him about that dream — asked us 
to go to work full tilt. As many of you know, we did that and I want to 
report to you this morning on what happened as a result of that dream, as 
we see it from where I sit; what we've learned from it, where we hope to 
go in the future and some of the things that we won't do exactly the same 
way again. 

Let me tell you about where Project Integrity stands today. As you 
will recall, we ran the claims paid in 1976 in 51 jurisdictions; 44 of 
those were complete runs and 7 were partial runs. Using screens, we 
identified about 47,000 providers, druggists and physicians. And we 
narrowed down, visually, to a group of about 2500. Our goal was to have 
50 per State, deliberately, as a learning experience. 

The audit agency then went to the hard-copy files and did a prelimin- 
ary verification to separate out the obviously erroneous situations. We 
then began to assign those cases to interested investigative agencies. 
Most went to the States, but we kept some ourselves; some, as you know, 
are being worked on by postal inspection, FBI and others. 

Now, where do we stand today? There are about 1200 active cases, 
divided roughly half and half between abuse and potential fraud. About 
two-thirds of the abuse cases are still undergoing action in the States; 
one-third of them have gone through final action, namely, overpayment 
recovery. Today the score stands at about $3.4 million in overpayments 
that the States are seeking to recover. 

In addition, systems changes have been reported — and I'm going to 
touch on a few of those in a minute — that have recurring annual savings 
potentials on the order of $7 million. We think both of these numbers are 
quite partial at this point, and when the full program is run out they 
will be much greater. 

On the criminal side, there have been so far 28 indictments of 37 
individuals, but there are some 173 cases today in the hands of prosecut- 
ing authorities for decision. That's just a quick look back at where 
Project Integrity has been and has come to. 

What about the future? As you know, we concluded that an effort of 
this scope is of great value as a learning experience, but is a poor 
technique as a steady diet. Its fallacy is it assumes each State has an 


equal need, interest and capability to attack problems in a given health 
field, and, obviously, that's an incorrect assumption. 

So, our plan today and for the future is to work with the States in a 
planning mode to select new subjects, to conduct research in the design 
and testing of detection techniques, especially those revolving around the 
computer, and then to make those techniques available on an optional basis 
to interested States. 

Our hope is that for each new subject area there will be a few States 
across the country with a high interest and, thus, give us an opportunity 
to work together in a fruitful learning experience. 

There are three such efforts underway today and, generally, we call 
them Project Integrity II. One is the analysis of billing practices of 
independent, commercial laboratories. In many cases, as you know, we are 
finding discriminatory billing of the Medicaid program and apparent 
collusion between labs and physicians. 

This project is now active in seven States, and we expect three or 
four more to be joining in the next few months. The pilot work was done 
in the State of California, and I consider it some of the best work I've 

The second effort in Project Integrity II, similar to the first, is 
to expose abusive dental services. This has been designed by the Phila- 
delphia Audit Office, working with both Virginia and the District of 
Columbia. Today that effort is underway in nine jurisdictions and, again, 
several others are giving it consideration. 

The third effort has become known as Operation Crack Down, and is an 
organized approach on abuses of drugs, usually representing collusions 
between physicians, pharmacists and drug pushers. This matter, you know, 
became of high interest because of exposes in the Philadelphia area 
resulting from the clever work of a reporter who went undercover and posed 
as a drug pusher. As a result of his publicity, this matter has touched 
off a wave of Congressional interest, and just recently a GAO review was 
announced as a result of those exposes. To date there are some ten 
localities working together on this project. 

I should point out that all of these are HCFA managed, that is, HCFA 
is actually overseeing the Federal participation in these three efforts, 
with support from our office. They expect next month, in late February, 
to have a "lessons learned" conference of the States in Operation Crack 
Down, and in the months of March and April, to do the same on both the 
labs and dentists. 

We have about eight other projects in a research mode at this time. 
I'm not going to take time to go through them, but just to mention what's 
in the offing. We will be publishing technical details in the next 60 
days . 


There are a series of computer matching opportunities. One compares 
hospital inpatient and office visit billings for the same patient on the 
same date to expose duplicate charges. We've run tests of this in Connec- 
ticut, and are running them elsewhere, and this proves to be a useful 
thing to do. 

Another is billing of physician procedure codes to expose excessive 
charges. I'm going to come back to that because it grew out of Project 
Integrity I. 

A third is a billing of outpatient hospital services in search of 
duplicate or excessive charges. A fourth is a billing of medical supplies 
and equipment, including billing for services after death. Another is 
billing for transportation services, to expose unnecessary or excessive 
trips. And then finally, there is a project to screen a group of other 
medical practitioners, including podiatrists, ophthalmologists and chiro- 
practors. Fourteen States thus far have cooperated in the pilot work 
which will lead to the computer techniques that we'll be publishing and 
make available to you. 

Now, let me spend the rest of my time briefly summarizing what I 
think, are some of the key lessons learned from Project Integrity I. As 
most of you know by this time, we've been writing "lessons learned" 
memoranda for the last several months. The auditors, investigators and 
HCFA Program Integrity staff have been trying to synthesize what they feel 
has come out of this effort in each of the 51 jurisdictions. Thus far 
we've produced 50 drafts and the 51st is in the mail. 

As I read through those documents — and they've become a very 
valuable tome from my point of view — and we hope to publish it and make 
it available to those interested, I tried to assess in each situation 
whether this was a worthwhile experience and to give it sort of a value, 
A, being outstanding; B, being satisfactory; C, being fair or poor. 

I graded two out of three of the 51 jurisdictions' experiences as 
either A or B. The remaining one-third were fair or poor for a variety of 
reasons. One important one is because the State was way ahead of us and 
they did not learn much from that effort. Another was that the problems 
of the State were not very great in these areas and a third was the lack 
of interest which we encountered; that was the least important. 

Let me give you a couple of quotes that come out of these "lessons 
learned" memoranda which illustrate some of the positive values. One of 
the States in the Northeast, according to the memorandum, which I'll 
quote, had the following to say: "Due to the cooperative attitudes shown 
by the State, an excellent working relationship with the HEW units in- 
volved has developed. That relationship can be expected to enhance future 
fraud and abuse control efforts." 

In the Midwest the memorandum states, "The State feels that Project 


Integrity has resulted in a more exacting case control system which should 
enhance their efforts in identifying fraud and abuse, and ensure a closer 
working relationship to its fiscal agents." 

In the West one of the reports said that "Project Integrity I has 
resulted in improved channels of communication, strengthened our working 
relationships and instilled a deeper commitment toward the elimination of 
Medicaid fraud and abuse, both on the part of State personnel and those 
within the Federal government." 

These quotes underscore what I feel to be a most important value of 
this particular effort, namely the increased understanding of the problems 
which each of us has, and an on-the-job training experience which I hope 
will make each of us more effective. 

Now, let me turn for the moment to the specific lessons learned in 
the physician and drug area, and end up with one or two philosophic 
observations. On the physician's side, we analyzed the 51 jurisdiction 
reports to identify the most frequently recurring problems that have led 
either to administrative sanctions or to potential criminal cases. Most 
often mentioned is billing for the highest procedure code available: 
this, in fact, is mentioned in eight of the State reports. 

The problem was particularly stressed by California, which indicated 
that it had 20 different RVS codes for office visits alone. Let me read 
you two which I think illustrate the nature of the problem. 

The intermediate examination code is described as, "A complete 
history and physical examination of one or more organ systems, but not 
requiring a comprehensive evaluation of the patient as a whole." 

The next higher ranking code is called the extended examination and 
its definition is, "One requiring an unusual amount of time, skill or 
judgment, but not necessitating a complete examination of the patient as a 
whole." If I were a doctor I don't think I would have much trouble 
selecting that higher code as the one to bill. 

Second in frequency in this physician area is the ever present 
problem of duplicate billing problems. This resulted from a wide variety 
of problems cited by the memoranda, computer screenings being the most 
frequent, but the practice of allowing physicians to bill under more than 
one provider code was the problem in several States. Duplicate billings 
were found in 32 out of 50 physicians in Connecticut where we ran the 
inpatient hospital versus office visit billing match for the same day. 
That was nicknamed by our Under Secretary Champion as "Project Empty Bed" 
which we thought was pretty apropos. Another is just plainly the result 
of sloppy record-keeping; a source of duplicate billings occurred frequent- 
ly in the case of partnerships or group practice. 

In five States the evidence suggested that more than one member of a 


partnership was billing for the patient's visit without apparent justifi- 
cation. Our imaginative auditor in that case described this as concurrent 

A third problem area closely allied to duplicate billing is the lack 
of precision in the claim or supporting records. It was surprising to me 
that we found this to be a problem across the county; it's not peculiar to 
any locality. Another aspect of this problem is the failure to show 
specific dates of service on the claim itself, or the failure to show all 
family member identifiers. 

A fourth group of billing problems in the physician area is charging 
for full office visits when the services rendered did not require the 
presence of a physician, such as injections and blood tests. This was 
documented in at least five States. Closely related are billings for 
services not provided or not supervised by the billing physician. 

Next we found a variety of abuses in the hospital area. One was 
billing for daily hospital visits whether such visits were performed or 
not. Another was billing for more than one service per visit, such as 
psychiatric service. A third was billing for after-surgery office visits 
when the fee for the surgery itself, presumably, covered after-care. 

In the nursing home area we found the problem of multiple billings 
where the doctor sees a number of recipients per visit and charges the 
prime rate for each one when that is not permitted under State regulations. 

Still another is the question of medical value of the necessity of 
the services rendered. In Washington, D. C, we found one physician who 
gave every patient an EKG on every visit. In another jurisdiction, there 
were several thousand cases of multiple visits billed at the prime rate 
when the rule in that State was that there should be one prime consulta- 
tion at the prime rate and follow-up visits at a reduced rate. 

Beyond the question of medical necessity is the unnecessary scope and 
duration of services. This was the cause of abuse in several States, in 
one of them the "lessons learned" memorandum says, "Out of 4,700 physi- 
cians in this Medicaid program, it appears that one out of six was provid- 
ing more care to patients than is normally to be expected." 

And, finally, there were a cluster of problems involving the labora- 
tories and their relationships to the physician, and that did lead to 
Project Integrity II and the pilot work in California which I've already 
described . 

Now, a variety of corrective actions are being applied to cope with 
these, according to the "lessons learned" reports. Perhaps the most 
frequently mentioned is better computer edits at the pre-payment stage, 


supported by peer group comparisions . Another technique on which favor- 
able experience was reported by many States is on-site review of physician 
records and interviewing of recipients. 

I found it very interesting that while EOMBs are being widely used in 
compliance with HR-3 of last year, we found a great deal of skepticism 
regarding that technique as compared with the personal interview technique 
in identifying real problems. Perhaps there's something important here we 
ought to stop and think about. 

Our auditors shared this skepticism, I might add, in a number of 
States, including here in New Mexico. A number of States are trying to 
solve the multiple procedure code problem and the multiple provider code 
problem. Laboratory problems are being attacked by paying laboratories 
directly; other abuses are being attacked by putting limitations on what 
will be reimbursed or how much, or how many visits, et cetera, will be 

We do expect to publish these "lessons learned" memoranda for all 51 
jurisdictions after the States themselves have had a chance to look at 
them and comment on them. And I suspect there will be a treasure of ideas 
for students like myself and you for some time to come. 

Now, let me turn briefly to the drug lessons learned. I believe they 
were equally productive. The most frequently mentioned, as you would 
suspect is prescription splitting; 18 of the jurisdictions specifically 
reported this one and I suspect that many more had the same problem. 

Rather than go through a catechism of the drug problems, let me quote 
from one "lessons learned" report. This happens to be the District of 
Columbia, where I believe every known drug problem has been encountered. 
I'm quoting just a few excerpts from that report: "One group of problems 
involves services billed but not rendered. This included duplicate 
billings; billings for the same drug and the code number of both generic 
and brand name; billing for greater quantities than ordered and dispensed; 
prescription splitting; billing for refills not authorized; billing for 
prescription drugs when over-the-counter items were prescribed and dis- 
pensed; billing for services for which there was no documentation; billing 
for greater drug strength than prescribed; use of outdated prescriptions 
by a provider; filling and refilling prescriptions without documented 
written or verbal orders; prescriptions from telephone orders which lacked 
vital information such as number, date, strength, dosage, et cetera, and, 
finally; charging the recipient as well as the program for the same 

Many actions to cope with these problems are being taken with signif- 
icant savings. One State in fact reports savings of $2 million from 
corrective actions in these areas. 

One of the most frequent techniques is to institute a 30-day supply 


equirement for maintenance type drugs, especially for nursing home 
>atients, or to impose, in addition, strict authorization limits for 
refills of controlled drugs. 

The telephone prescription abuse was a wide concern. Some States are 
now requiring signatures of both the doctor and the patient before honor- 
ing a claim; others require that the claim identify the prescribing 
physician who telephoned the prescription. 

A combination prescription-invoice form is being used in Maryland and 
that intrigues me as one to look at. In fact, we found in Maryland, after 
looking at their worst cases in the drug area, that none met the test of 
either criminal or administrative sanctions. 

Recipient interviews and on-site surveys of pharmacists was widely 
advocated and in-depth audits on a regular basis is now being practiced in 
a number of States. 

What do we see ahead as a result of these kinds of lessons? 

I'd like to sum up, referring to some of the correlations which sort 
of stand out as one studies this whole body of information, particularly 
in terms of comparing the successful results of Project Integrity with 
MMIS systems and their status, utilization review staffs, Section 17 
units and the availability of adequate sanctions within the State. 

Using the A and B States I referred to earlier, that is those that 
appeared to have a worthwhile experience out of this, most of the Section 
17 units we found had been established in those particular States, those 
that had the A or B type experience, outstanding or satisfactory. 

Secondly, the majority of the certified MMIS operations that expect 
to come on stream in the next year were in that category. Most of the 
successful utilization review staffs were in the A or B States. The 
States having a successful Project Integrity outcome also tended to have 
formal sanctions and active application techniques for those sanctions. 

I might say that HCFA is very close now to issuing a regulation to 
mandate effective sanctions in all States which, I understand, has been 
widely requested of HCFA by the folks from the States. They are likewise 
perfecting a model Medicaid State law which will be offered for consider- 

We also found some negative correlations, and I'll end with two. In 
some States where there are now Section 17 units certified or planned, 
there appear to be opportunities to improve utilization review units, 
either in terms of size or quality. A similar negative correlation 
existed in some States having certified or planned MMIS systems. 

Now I do not want to infer for a moment that we would discourage any 


State from having an effective computer system or fraud investigation 
unit, but I do worry about the prospect of finding ourselves building such 
capabilities without filling that vital link needed to make effective use 
of the computer output in screening out the cases worthy of sanctions or 
fraud review. In other words, I believe, we need a balanced total system. 

Now I would like to speculate, and get your views on the proposition 
that perhaps we ought to be thinking in terms of Federal incentives for 
the future to help States round out and balance out all components of a 
total system (the data base, the analytical effort of a UR system, as well 
as the skill of a well put together fraud control unit) so that we have a 
total ability to approach these problems and do not overdo one or the 
other . 

I think what I've learned in the last two years is that we must work 
as partners in this effort, no one of us can mandate the other to do the 
job, we must learn how to do it together. 

Let me challenge you again with that last thought of mine, which I 
haven't passed through my staff. Are we in danger of getting an imbalance 
in the resources that we put to work in the MMIS systems, the UR systems, 
and Section 17 systems, where the Federal incentives favor only one or two 
of those components at the expense perhaps of the third? This is what I'd 
like to get some reaction to. Is it a problem? 

Questions and Answers 

MR. DAVIDSON: My name is Dave Davidson. I'm from Alaska. We 
certainly have a unique problem with regard to implementing fraud and 
abuse simply because we have such a small staff. One of the problems that 
you just touched upon is the fact that there are financial incentives for 
fraud and abuse, but there are no financial incentives for a simple claims 
processing system that includes utilization and review without going into 
an MMIS system. We can't justify that kind of a system for our small 
State, but by the same token, we can't take advantage of the match for the 
fraud and abuse unit. I'd like to know what kind of recommendations you'd 
like if you're looking for specific recommendations from States? 

MR. MORRIS: I am. One of our opportunities in the IG area is to 
make an annual report to the Congress and the Secretary, in which we can 
deal more broadly and more far ranging ways than the Department does in 
its normal legislative program. We are in search of ideas for future 
study by Congress and the Department to improve the statutes and the 
regulations . 

MR. PIAZZA: Joe Piazza from New Jersey. We had a fraud control unit 
which predated Section 17 by about three years, and the Medicaid State 
agency had a staff which was in very nice balance with the fraud unit. 

With the promulgation of Section 17 and the 90 percent Federal 


matching dollars, the attorney general's Medicaid fraud unit has doubled. 
And quite frankly, the cases which they are to investigate now are twice 
as large as we are. So, I think there is an imbalance there. Perhaps 
some thought ought to be given to some increased matching for the State 
agency units which do the front end work. 

Secondly, it seems that some State legislators have taken Section 17 
to mean that they can terminate funding for the Medicaid agencies, and I 
think one State in point is Connecticut. Shortly after Section 17 was 
enacted, all funding in Connecticut for any abusive efforts was withdrawn. 
I think some thought must be given to that as well. 

MR. CHIARAMONTE: My name is Joe Chiaramonte, I'm from Nassau County 
in New York. 

I want to say that, in looking over the speakers, the only vendor of 
care that's going to address this conference is me. I'm an MD. 

There are no people here from laboratories, from pharmacies. 
There seems to be no input from other than systems people to assist the 
States, the Federal government in arriving at what you describe is the 
totality of the issue. 

I will make a point of this. I think abuse is the largest area in 
terms of dollars and in poor quality of medical care, which I have not 
heard addressed here and was infrequently addressed in December at Mr. 
Califano's conference. 

MR. MORRIS: Joe, I've certainly got to agree with everything you've 
said. I think we do give insufficient attention to the provider and the 
practitioner, and to the quality aspect. Our own studies clearly show 
that fraud is, at best, 10 to 15 percent of the toal area of fraud, abuse 
and waste . 


A Funny Thing Happened on the Way 
to Certification 

John Hall, MMIS Project Director 

Department of Social and Rehabilitation Services 

Topeka, Kansas 


You'll notice the program said, "A Funny Thing Happened to Me on the 

Way to Certification." I want to clear the air somewhat about this 

presentation. I'm going to have to read most of it, because there's no 
way you could memorize it. 

I don't think that MMIS is particularly funny. I'll start from that 
premise. However, having lived with the Kansas project for 14 months, I 
found some ways of expressing what was transpiring that may have deviated 
from the norm maybe one, two, three or four standard deviations. It got 
to the place where they talked about a one-man operation; I think I typed 
97 percent of the RFP that went out and all of the other materials 
— I didn't have a secretary. It got to the place in time, and I don't 
want to steal anybody's thunder, or embarrass anybody, but I was writing 
memos to the Regional Office on the backs of paper towels that I got out 
of the men's room. I think the Federal representative from Region VII 
will attest to that. I told him if he didn't like that, he'd better watch 
it, because I'd go to that other paper that comes out of there and there 'd 
be the long scroll coming to him next time. 

After we went through the very exciting and exhilarating experience 
of trying to certify Kansas MMIS, I called the Federal staff aside one 
morning and I said, "Now here's really what happened. Here is the way it 
can be written in ways that you can understand." 

We got the word back on August 8 that the Attorney General said that 
Kansas can no longer continue to go the fiscal agent route without putting 
it out for bid. And so, we had until July 1 to begin processing claims. 
And I heard it from Regional Office, I heard it from everybody that bid on 
MMIS in Kansas — you don't know what you're in for. And every one of 
those admonitions turned out to be exactly 100 percent true. 

You've got the Kansas MMIS and you start out with the initiation 
period, and you go clear to certification. 

Then, I tried to figure out; where did we start, and how did we get 
there, and who got involved, because we had a bunch of people that I never 
knew existed. And when the guy said, "Ah - come over here and work on 
this MMIS, there's not much to it, you know, just a little information 
system, and you can do it in your spare time, and there's not a great deal 
of involvement." Then you'd be getting letters or telephone calls, 
"Well, now I'm from the Governor's Office. Now, I don't want to say now 
that the Governor is trying to put any pressure on you, but it would be 
wise if you did this-and-so ." And so we had a lot of people getting 

Then we got down to the place that I think that we finally put it 
out for bid. Then we evaluated the bid — we had an attempt to nullify 
the award. That's fun. Contract negotiation and approval. 

Then we had the planning, development, implementation stages; the 


operational phase of MMIS ; and the certification review, the exit confer- 
ence and we hope that within the next few weeks, we'll know whether we're 
certified or not. 

Now, all of that's important and you must keep in mind all of those 
items, as I speak to you, because it will help you understand one man's, 
or one State's, MMIS. I tend, as I said, to be very serious about all 
matters — you can't look at the funny side of anything. 

You've seen the flow charts. And if I were to try to explain to you 
everything that transpired in those flow charts, it would take all day. 
So what I did was to write in 50 words or less, what was transpiring at 
all times. 

I sat down one day and I said, "Somehow, for the historians of the 
State of Kansas, I must put in writing what transpired." 

Let me read only one chapter of the book of MMIS. I will tell you 
now that, much to my surprise, I was awarded a book last Friday by sources 
to remain anonymous, that says, "Kansas MMIS as Viewed by John Hall", and 
it contains all of these and more of the types of things I'm about to 
relate to you, such as a Book 2 and Book 3 of MMIS. 

And it came to pass in the city of Topekas that a decree was issued. 
In it, Attorney Generalus — in the land of Social RehaSer, decreed "Thou 
House of Social RehaSer shall harken unto my words and have all the hosts 
of fiscal agentdom labor on the Titlus XIX — " (that's Roman for Medicaid 
Scrolls.) And that you shall no longer sing a cappella with the Blue 
Shield choir or play around the cross of the same color on thy sack bid 
and sultries." 

So the elders of the House of Social RehaSer gathered together in the 
inner chambers of the holy place and spake on this manner. The Attorney 
Generalus, back from his sojourn and riding in an official Kanusius 
chariot, unofficially, must redeem himself and purge his transgressions. 
Therefore, the elders of the House of Social RehaSer knew that they must 
find a serf in the kingdom who could find favor in the eyes of the Attorn- 
ey Generalus, and his utterances, written on scrolls, then could be 
the atonement for sin. 

Then the elders of Social RehaSer spake on this wise. "Where can we 
find a vassal who knoweth little; but who will write on the parchments the 
things that would be pleasing to Attorney Generalus?" "Hark", cried the 
Chief of Administralia. "There abideth one in the land of Rehabilitatia 
that has been chasen three times by the Czar of all there are and VR, and 
this vassal can be bought for a pittance. Yea, he can even be had for 


So it came to pass that the words of the Chief of Administralia were 
so. So the vassal of VR was brought before the triumvirate of judges of 
the House of Social RehaSer to see if he was fair and comely, and was not 
wanton in the areas that Social RehaSer desired. The Chiefs of Adminis- 
tralia, Datum Processus, and Titlus XIX asked many riddles regarding that 
Roman program, Titlus XIX. 

Yet in all of this, the vassal opened not his mouth, nor railed 
against his accusers, seeing that he did not understand Roman. Then the 
decree went abroad that the vassal of VR should henceforth be known as the 
Scribe of Titlus XIX. Then a solemn assembly of the high priests and the 
elders laid their hands on the vassal and annointed him Scribe of Titlus 

Now, not many days hence, the scribe began to write on tablets of 
clay, the deeds that Titlus XIX had done in the days of the Blue Cross 
captivity. This angered the Titlus XIX handmaidens, and the legions 
thereof; and the Scribe cried out — I'm sorry — fleeing then, to a city 
of refuge. (That means I got kicked out of my office.) 

Fleeing from the city of refuge, the scribe encamped in the land of 
Publica Assistiancia for 60 days, until the Titlus XIX's threats had 
changed from those of scorn to exile. Then the scribe crieth out, "Oh, 
wretched man that I am, who shall spare me from the wrath to come?" 

Behold, there cometh from the land of Datum Processus, State Purchas- 
ia, and all the houses of Kanusius, to comfort the Holy One of Titlus 

The parchments, the tablets of clay, and the etchings in sand were 
all derided as being worthless as the dung heap. "Down with him, down 
with him", came the cry, "for he knoweth not the law and the covenant, as 
set down by our forefathers in the land of Kanusius," uttered these wise 

Then came a voice as one crying in the wilderness; knowing not from 
whence it came, the scribe of Titlus XIX followed. The voice was that of 
Augustus Kennedius, the direct descendent of King Richard the Lionhearted, 
King of State Purchasia in the land of Kanusius. 

Thence, the humble servant, the Scribe of Titlus XIX, began to 
scribble. Only this time, it was at the feet of the great teachers of all 
of the land of the Departments of Administralia. Day and night, these 
learned scholars instructed the scribe in all of the ways of Tightness, 
and he followed their teachings verbatim. 

Then in the 11th month, on the 4th day, at the 9th hour of the reign 
of King James of Georgia, the King of Purchasia said, "Well done, thou 
good and faithful servant. Present now the parchments and tablets of clay 
thou has prepared and I will etch them into pillars of stone and broad- 


cast them throughout the land, so that the scourge is ended, and that 
MMIS is near, yea, even at the door." (That was the release of the RFP, 
of course.) 

In the 11th month on the 22nd day of the 3rd year of the reign of 
King Robertus Bennett — (that was our Governor) — all of the great, the 
near-great and the ingrates gathered to dispute and discuss the MMIS. 

Of those gathered there, three did not understand what the Kanusius 
nation wanted; one was not aware that MMIS existed; and one was there 
because he heard there was going to be a meeting. 

Still at the pre-bid conference, they gathered profits, beat their 
chest, pulled their hair, put on sackcloth and sat on their ash heaps and 
cried out with a loud voice. 

(Now, that's not made up because one fellow there at the pre-bid 
conference had one of those styrofoam cups, and he got mad, or upset, or 
something, and he put his ashes in there and this thing just went up in a 
pillar of smoke. We had to clear the room. As I said, everything in here 
actually happened. None of it's made up.) 

Then the King of Purchasia spoke and said, "Ask about MMIS and it 
shall be given you; seek and ye shall find; knock and I'll have my cap- 
tains place you outside the chamber door." At about the time of the 
Messiah's birth, it came to pass that the parchments of the wise men were 
gathered together into the House of State Purchasia, who was the direct 
descendent and possible heir to the throne of King Richard the Lion- 

And Augustus Kennedius taketh the parchments, and ordained the Scribe 
of Titlus XIX to see that the words of the wise men were acceptable in his 
sight. (Of course, now this is the evaluation of the RFP; they're the 
bids that come back.) 

On the parchment of one of the bids — EDS Federalus — the scribe 
wrote, "Well done, thou good and faithful servant." The blessing pro- 
nounced upon the wise men of EDS Federalus angered the army of the Blue 
Shieldom warriors, and they took up their crosses, blue now being a signif- 
icant color, and laid siege on the camp of the Attorney Generalus. 

They cried out with a loud voice, "Woe unto the scribe of Titlus XIX, 
for he hath perpetrated a grievous sin against all the remnants of the 
house of Blue Shieldom." 

They uttered again to the Prince of Attorney Generalus that for a 
half-score and two years their domain was not approached, and now the 
enemy from the land of Perlosia was enslaving the land of Kanusias. 

The Prince of Attorney Generalus spake thusly, "What is done is 


done. The scribe of Titlus XIX hath followed my commandments and in all 
manner is pleasing in my sight." Then the King of Perlosia sent his 
emissaries to Kanusias to bring an end to the dominion of the house of 
Blue Shieldom, and Augustus Kennedius saith it is good, and washed his 
hands of the whole affair. 

Now, if you were to pick that up as an outsider in Kansas, you 
wouldn't know a thing that was going on. I've worked around EDS for a 
while; they know what's going on, and everybody that's here from CSC and 
TCC and Blue Cross or any other place knows exactly what I'm talking 
about. It was a fun time. 

You know, you just can't live in the past, you must go on and I won't 
read you any more books of MMIS. When you start to plan an MMIS , you 
begin to deal with a lot of people, and they all talk in acronyms. 

You saw all of the little charts there; the Attorney General; you saw 
Public Assistance; you saw Medical Service; State Purchasing, and when you 
go down to meet with them, they all rattle out the alphabet to you. And 
so, I sat down one day, and tried to put it all back together, and here's 
what came out — acronyms of MMIS. 

One day while working in DVR I got a call from JCS in SRS and he 
said, "Come over to our side and work with MMIS." Now, I'd never heard of 
MMIS, but I figured it was more of a challenge than DVR. JCS explained 
that MMIS was an information system for MSS. He said that all you had to 
do was write an APD and RFP to HEW SRS for increased FFP. 

Delighted at the opportunity, I embarked on the project of writing an 
APD and an RFP that took me through all of the realms of DOA, ANR, DP, FAA 
and the AG's office. In beginning to write the RFP, I was soon admonished 
by RO of HEW, that HEW SRS was no longer existent, but rather it was now 
affectionately known as HEW HCFA. 

Seeing the error of my ways, I repeated 1,000 times, that never again 
would my lips stumble over such sacred terms as RFP, APD, MMIS, FFP, FAA, 
ANR, DOA, MSS, PA, MA, or any of the other terms held so dearly by bureau- 
crats at every level. 

Then came the day in Kansas to hold the bidders conference, and the 
whole alphabet was there. There was PHA, CSC, PRC, BC/BS, TCC, MS, KPF, 
CIH&S, D&A, EDSF and HEW HCFA. The bids were closed and the successful 
bidder was announced, and you guessed it, another four-letter acronym — 

When EDSF came to town, the MMIS fun was only to begin. There were 
meetings held in the a.m. and the p.m. to discuss all types of problems. 
With MMIS, FAA, DOA, RNS , and SRS, EDSF talked about ID's, FPP, SRO's, 
TPL's; sometime all in the same sentence. 


Meetings were held to discuss the TADs and ICF/SNF and ICF/MRs. By 
this time my head was swirling, but I kept setting up meetings and attend- 
ing them to see if anyone would run out of acronyms, or even duplicate 
some . 

To my surprise, it never happened. Some education was accomplished 
when a few people discerned that MARS was not a chocolate and nut covered 
candy bar or the red planet. However, every accomplishment was tempered 
with a setback, when others believed SUR to be a gentleman incorrectly 
spelled . 

Days passed, and then I heard about EPSDT. I thought this time I'd 
surely found the answer — EPSDT had to be Hebrew. And all that I needed 
to do was to get the vowels inserted correctly and decipher the word; 
however, true to past form, I failed again. 

Then EDS decided they would construct claim forms to comply with MMIS 
and put on them things like EKG, HIC and they didn't want to process it 
with OCR. MSS wanted CRTs to read all about the items on their RA but SRS 
did not see the need in buying those. The ADs and the RPHs jumped on 
their PDRs and said make sure you get PA for certain services. 

Then there was the inclusion of the LOF on OP, IP, SNF, ICF/MR, IP 
signed off by the director of MSS, K, OK, RN. 

In the conversation with PA, we learned all about the 310Ts and the 
155s and the SB and how the IM workers carried out all of these tasks. 
Time and time again, we heard how BC and BS formerly handled their EDP. 
And just as many curses against EDSF because they were not going to retain 
the status quo. 

RNS and FAA couldn't match their 2082s and 0A-41s to send to HEW 
HCFA, so they pulled their collective hair. 

ADC and AFC and GA are herein inserted with special note that they 
were never forgotten. Then after meetings with SRS, with EDSF, there came 
outside acronyms, such as the KPA, who wanted EDSF to support their 

Also, such honored acronyms as KNHA, KHA, KCA, and other non-interest 
groups made their interest known. Then about the time that the SNF, the 
ICF and the ICF/MR triad became clear in my mind, the acronym changed to 
ACH. After the first pay cycle was made, only the suffix "E" prevented it 
from being called ACHE. 

EDS then put in place the systems edits of ACHs, formerly SNF, ICF 
and ICF/MR; and to this day, I do not know how to pronounce DELDSTCCMSCOP- 

Of course, my favorite subject is TPL , because of the many acronyms 


it generates. I could hardly keep from crying when I heard such acronyms 
as OHI, WC, RD, VA, MED ANB, DHM, and a cast of thousands. No one can 
ever write about MSS and its dealings without referring to that headline 
topic, FP, and its 90/10 FFP and its resultant FLAP. How eloquently the 
RPH spoke of the NDC and the FP, and how it must be captured in the MARS 
for the NCSS 2082 and other stirring and exciting reports. 

The MD and the NMSS has his own terminology when he speaks of PSROs 
and the MOU, and down to the very end, I did not know what an MOU was. I 
finally had to ask him. I thought it was something that a cow did and it 
was incorrectly spelled. 

EDSF adds little to my understanding, however, when they put out ICNs 
and PCNs on their claim forms, and then refer them back to their RAs . EDS 
began to swamp me later on in the project with MARS and SUR reports with 
such enlightening titles -- now, grasp these, HMMR 101H, HMMR 384H, 
written in JCLCOBOL. And I wonder — would RMN have uttered such things 
into his now infamous Watergate tapes? 

Now, 13 months have passed since the project began, and I have been 
told to get ready for certification by HEW HCFA, the successor to HEW 

This means that the APD and the RFP as drawn up by SRS for MSS with 
the assistance of RNS , FAA, ANR, DOA and SPD, et al , will be submitted to 
HEW HCFA to see if we are in compliance with MSA, PRG-31. If compliance 
is met, then the MMIS or MSS, as designed by EDSF, will qualify for 
increased FFP. However, if this process fails, then as the PD of the 
MMIS, I will be SOL at the SOB and my new job will be with the TRD and 
here's the hint. Their motto is, quote, "Satisfaction guaranteed or 
double your trash back." 

Now, that got people's attention. MMIS was still kind of galloping 
along at a snail's pace at that time, however. I knew it when the people 
at the highest echelons in certain areas would come up and say, "Now, if 
we're going to do anything with that MMIS, we ought to get with it." RFP 
had already been bid. 

So I thought it was time to do an educational program, so I did one 
on one of the six subsystems. I thought the one that would get the most 
attention would be SUR, so here's the way that I tried to advertise SUR on 
our bulletin board. 

Are you interested in an all expense-paid vacation? Would you like 
to spend time along the banks of the scenic Missouri River, with its 
rolling farmlands and fall foliage and fauna in brilliant colors, being as 
close as looking out your window? This can be yours, and even more, if 
you are the winner of the SRS Sweepstakes. Never again will you have to 
put up with a nagging spouse, crying child, or a leaky faucet. No more 
will you tire of mowing the lawn, raking the leaves, or shoveling snow. 


The State of Kansas, through its duly authorized agencies, is prepared to 
give you all of these luxuries, and even more, such as: (1) private and 
semi-private rooms; (2) three square meals a day served family style; (3) 
supervised crafts; (4) recreational facilities; (5) free medical services; 
(6) chapel services for all faiths; and (7) free movies. 

Now these and many more activities are yours for the asking. All 
that you have to do is register. The competition is open to anyone, 
whether rich or poor, doctor, lawyer or merchant chief. All that you have 
to do is get in touch with the local SRS office, conveniently located in 
all 105 counties of the State, and sign up for public assistance. 

You must meet minimal poverty requirements to enter; if you do not 
meet the requirements, tell a little white lie, and get your name into the 
grand sweepstakes barrel. If you are a nursing home director, ambulance 
service, pharmacist, hospital administrator, chiropractor, dentist, quack, 
or anyone else who has taken the Hippocratic Oath, just write to Medical 
Services of SRS, in 25 words or less and tell why you would like to be 
considered for the expense-free vacation. 

To be in the running, the public assistance recipient must do some- 
thing similar but not limited to the following: (1) have seen more than 
30 doctors in a 90-day period; (2) presented 30 or more prescriptions for 
20 librium 10-milligram capsules in a 90-day period; (3) had 45 chiroprac- 
tic treatments or more in a one-week period at the local massage parlor. 

Note that judges do not want to stifle originality, therefore, the 
more original the recipient becomes, the longer his vacation will be. 

To be in the running for the grand sweepstakes prize, the provider 
must have performed superhuman tasks, such as: (1) extracting the same 
tooth 16 times from a cadaver; (2) performing 6 abortions on a 96-year old 
man posthumously; or (3) performing three appendectomies while playing 18 
holes of golf. 

There will be winners in all classes and all prizes will be awarded 
and the decision of the judge, is final. In case of ties, both parties 
will receive the same prize. 

All entries become the property of the SRS SUR unit and none will be 
returned. The firm of Hacker and Walker, are the keepers of the informa- 
tion and only they will have the winners hermetically sealed in plain red 
and white and blue envelopes. 

The winners will be escorted, toll-free, across the Kansas Turnpike 
to the Bonner Springs exit. At that juncture, the convoy will proceed 
north to that quaint city by the river, Lansing, Kansas. A right turn 
midway through the city of Lansing will take the caravan to a rustic 
native stone structure. At this point, uniformed escorts will meet the 
entourage and they will be taken inside to meet the manager of the resort 


facility, at which time they will be given their second prize — a new 
suit of clothes. 

The outfit of each winner is the same so that the recipient and 
provider will both look alike, and consequently, be treated with the same 
esteem during their vacation at the resort. 

Many, many exciting experiences await the winner in the SRS Sweep- 
stakes. So don't delay — enter today. 

Thank you for sitting through part of your coffee break, and for 
giving me the opportunity of sharing these things with you this morning. 


The Need for Planning and Organizing for the 
Management of New Technology in a 
Public Agency 

Bruce Kozlowski, Director MMIS 

Analysis and Development Division 

Office of Support Services 

Department of Social Services 

Lansing, Michigan 


I don't know how anyone can follow Mr. Hall. I find myself in a 
position of speaking on a straight subject, having followed one of the 
world's greatest comedians. I'm not exactly sure how I got here, but I 
can give you a kind of short synopsis of the events and why I think they 
took place. 

If you look at the title of this presentation, "The Need for Planning 
and Organizing for the Management of New Technology in a Public Agency", 
I'm sure you question, as much as I do , "What does that mean?" 

And in order of things, I think that title was developed in our 
bureaucracy in Washington, and then I found out there had been several 
speakers who were assigned to speak on this matter and all backed out 
ahead of time, and they asked me to come. I came because they offered to 
pay my way here, and I had no other way to come. 

Then I found out that the reason everybody else backed out was 
because the other speakers all knew about Mr. Hall. But that still leaves 
me the dilemma — what is this subject all about? I envision the purpose 
of this presentation to provide a user's view of the challenges in adminis- 
tering a public program through utilization of new technologies. 

To do this, I'm going to use a real-life example, one I'm very 
familiar with, and that's the Michigan Medical Assistance Program, which 
I've been with since inception and our takeover as the fiscal intermediar- 
ies for medical assistance. 

We began back in 1966, like many other States, very small. We had 
200,000 recipients; we expended $66 million. And our growth, like many 
other States, was rapid. We now service over 900,000 recipients and our 
expenditures for medical assistance alone are about $850 million. 

One in ten of the citizens in the State of Michigan is on medical 
assistance. Our expenditures alone makes Michigan one of the biggest 
programs in the country; and from a fiscal standpoint, that's an honor we 
could do without . 

From the very beginning, it was management's desire to maximize 
benefits, while minimizing administrative costs. We oftentimes lose sight 
of the fact that our whole purpose as intermediaries for this program is 
to insure maximum services to the medically and financially indigent in a 
given State. 

As was the case in many States, the original program that was devel- 
oped back in '66, was developed in a very short period of time. It failed 
to yield the kind of management controls and capabilities to provide for 
effective management of a public health program. We therefore initiated a 
project to design a new system that would give us capabilities for effec- 
tive management. 


This system was based on a degree of sophistication, automation, 
beyond that in existence at the time in health insurance programs. 
Intrinsic to this system was a data entry subsystem predicated on the use 
of optical scanning technology. This allowed us to make optimum use of 
rapid data entry techniques by literally reading typed invoices onto a 
tape, which could be easily assimilated into the system mainstream, 
bypassing the more expensive, time-consuming, conventional entry data 
techniques . 

Because of the speed of this process, and the minimal front-end 
intervention, we were able to commence editing invoices through the 
invoice processing system within 24 to 48 hours from the time they were 
received from the post office. 

Our experience to date has been that a complete cycle from receipt of 
an invoice to generation of a check, or the remittance advice, which is 
the accounting document, is 10 to 15 days for 85 percent of all the claims 
we receive, and 30 days or less for 99 percent. With a daily volume of 
over 70,000 claims per day, we're kind of proud of that experience. 

I didn't come here to sell you on optical scanning, but I bring OCR 
up because we're one of the few States that uses it as an input mechanism. 
It was a very new technology when we introduced it back in 1972, especial- 
ly for our kind of health application. 

The introduction of optical scanning did not go easily. It was so new 
that we had to do a very extensive selling program, both our own internal 
management and with the providers of services, who were going to be 
impacted by this new monster called optical character reader. 

Back in 1972, and even to the present, the general public has had a 
bad enough view of computers in general; here we were introducing some- 
thing new, and we were doing it as a State entity taking over a health 
program. I need not tell you what the medical community and the general 
public thinks about bureaucrats getting involved in health care. But we 
did spend extensive hours introducing and training and familiarizing our 
own management with the ins and outs and what-fors of the thing called an 
optical character reader. 

We also went out, at the same time, and, through work with our major 
provider associations, explained to them the working mechanism of optical 
scanning; the advantages that were going to be a result for them — a 
shorter payment time than they've ever had before; and, very definitely, 
the advantages to the State, because we all pay taxes and the cost savings 
was going to be shared amongst all of us. 

We ended up with a management group less leery about this new techno- 
logical capability for data entry, and a provider community more willing 
to accept this new mode of processing and more apt to accept the kinds of 
problems that you experience when you debug the new system. 


I think it was a good experience and in a policy we've followed 
since. If you're going to be effective, in any technological change, you 
have to have the support of your own internal management, their understand- 
ing, support and commitment, but at the same time, if it has a notable 
impact on the provider group, then it's to your advantage to include them 
very early on, and make them your friends in the endeavor rather than 
adversaries after the fact. 

From an auditable cost standpoint, our OCR rental costs, manpower 
support, use of the specialized forms have proven to cost one-third to 
one-half of what the old key entry type system was running us. So, it was 
new technology; it's been very effective as far as processing; it's been 
very cost-effective to everyone, and, at the same time, we are able to 
implement it with all the problems that you have in implementing a new 
system, because we took the time and initiative to work with our own 
management and work with the outside provider groups. 

This has not always proved to be that successful. I introduced, and 
worked with, the Canadian government on an optical scanning system for a 
bonding issue, and it proved beyond a doubt the importance of commitment 
to any technological change. 

We went there, and a small contingent wanted to move forth with this 
new capability; overall management was adverse to it, they were very 
content with what they were doing. Cost wasn't that much of a considera- 
tion; the old system was working, let's not change it. 

And we had a user group, which was the banks, and they were literally 
against any changes, because it would take a reorientation for them, and 
they were concerned about the problems that may result. 

We were successful there in turning around the banks to be supportive 
of using this new system and that required forms, and the new format, 
appropriate typing, clear, concise, but we were never successful in 
convincing upper management of the advantages in using this equipment, and 
to commit themselves to using this equipment. 

To this day, which is about five years after the fact, they operate 
with two systems in parallel; or, at least, if they're not using them in 
parallel, they're stand alone systems, side by side. 

They will use scanning until there's a slight glitch in the system, 
and they immediately divert over to key-in coding, and they go along with 
that, while they fix the glitch. They're operating two systems, the 
duplication of which is unnecessary and the cost of which is never going 
to be justified. And they will never make the transition, because they 
lack commitment in their upper management to taking on this new system. 
You have to be totally committed; your people have to be involved. 

We found an effective method to minimize manual input when we got to 


optical scanning. At that point we moved to wanting to find a more 
effective method to bring about a reduction in the amount of paper flow 
that was going through our system. This is one time that we sought out 
the newest in technology and ended up to be 100 percent wrong. 

In our system design, we failed to imagine that we were going to have 
as many pens as we did, and we designed our system to use the newest of 
reader-printers, to produce the hard copy necessary for claims resolution. 
Within a few short weeks, we found the machine couldn't produce enough 
copies to meet our needs and if we were to buy enough machines to come up 
with the copies, it was no longer cost-effective. 

Because we operate in batch mode, a little hindsight paid off when we 
realized that by going to our original invoice batches, we could extract 
the hard copies we needed and satisfy our claim resolution requirements. 
This is one time where we didn't look at all the options, and we opted for 
sophistication that was beyond, first of all, its capability, and secondly, 
it proved to be beyond our needs. 

So, I guess we need to temper what we do from a developmental stand- 
point; there's a lot of new things out there, but do we really need 

We've gone on-line to enhance our claims resolution by using CRTs; 
that application has proved to be very effective, and a lot of States use 
it. It's an excellent vehicle for doing correction; you have an image, 
you bring the image up, you have quick transmission time, but, most of 
all, because you're on-line, it gives us the capability to access the 
system to meet a myriad of our management requirements. 

We went into the use of tape-to-tape billing. That has been received 
with a minimum amount of emphasis from management. I'm not exactly sure 
why, we've been involved in doing so many other things in development of 
the program, tape-to-tape 's been kind of left behind to fend for itself, 
but, we introduced it to our providers. It's been received fairly well, 
it sure as heck proves to be cost-effective to the standpoint that it 
bypasses our costs from optical scanning on the intitial input. The pen 
rate is substantially less than you have with any other mode of operation, 
because there's a pre-editing capability that can be built in. 

The one thing we've been apprehensive about in tape-to tape is we 
have never developed it to the point, or defined it to the point, that it 
gives us the kind of management controls we feel comfortable with. Here's 
a vehicle I have no doubt could prove to be cost-effective. It is effec- 
tive in getting the claims in; we have a large provider population that 
wants to use it, but we haven't maximized on its capabilities because of 
this apprehension. 

We've undertaken, in the last couple of weeks, a new endeavor to 
reassess tape-to-tape, define its future from a management standpoint, 


build it into one of our management goals, and with that kind of emphasis, 
I'm sure it's going to grow substantially. 

Of the utmost importance — and I think it's going to be the emphasis 
through this whole conference — to the early success of our program, and 
to its present success, was the recognition of the newly developed Medi- 
caid Management Information System as a means to improve the capability of 
the State to administer the Medicaid program. 

Michigan obtained its certification for its system in 1976, and 
anybody who's gone through it knows that Mr. Hall's right in one respect 
— a funny thing does happen on the way to certification. It's an inter- 
esting experience you never forget, and you swear it's never going to be 
over and when it comes, it's a refreshing feeling. 

We were fortunate enough to have a tremendous amount of technical 
input and assistance which helped us get through the process that you have 
to go through for certification. 

We continue to believe that MMIS is truly one of the greatest man- 
agement concepts ever to come out of HEW. It has six main subsystems. 
For those of you who aren't certified, I want to tell you how we have used 
them for greater enhancement of our program. 

There's the claim information system, provider enrollment, invoice 
processing — which really has two subsystems: the claims processing 
subsystem and the reference file subsystem; surveillance and utilization 
review, which will be covered extensively over the next couple of days; 
and management and administrative reporting — MARS — which is an excel- 
lent management tool that I think is frequently ignored, is very seldom 
talked about at conferences, and hopefully, some day, it's going to come 
up as being one of the main topics. 

The claim information system may be the neatest thing that's ever 
come down the pike for us. We put CIS in long before we were certified. 
The system gave us the capability to load recipient eligibility data 
on-line from all our counties to a central source. At the same time, it 
gave everyone the capability to access the central source for information, 
including our providers. Our major providers can request, and do use, 
CRTs for on-line access to recipient eligibility data. 

This has done great things for our relationship to provider groups in 
participation, and has definitely cut down on the problems we had being 
inundated with telephone type access for client information. 

Provider enrollment — this is a system we put in at the time we got 
certified; we're in the process of rewriting it; it's been patched so many 
times we can't do anything with it anymore. We end up with a team of 
people that just were keeping it going. It's going to take us 18 months 
to rewrite it. 


We're rewriting with the view that provider enrollment is more than 
just a single enrollment system; it should be a provider tool. We are 
redefining the data base; we're going to use provider enrollment as a 
reporting tool for provider activity for overall administration and, also, 
as another tool for indication of potential misutilization as a support 
for our SUR fraud and abuse efforts in Michigan. 

Invoice processing system stands alone. We've been most satisfied 
with what we've been doing; we rewrote our system once, and that was after 
three years of operation. We're in the process of looking at rewriting it 

MMIS is neat. The problem is Medicaid grows too fast. We put our 
system in effect, and pretty soon you find out your daily payroll is 
approaching to take longer than a data run. If you run five dailies and 
then you run a weekly, and your weekly payroll takes longer than a week, 
you really have problems. We approached that. We rewrote that so we now 
have a daily that runs less than a day, but our Region V office says that 
we should be able to run our whole daily in a couple of hours and, so, 
we're going to tap their great expertise to show us how that's done. 

But volume increases have been substantial and at times we've planned 
for them and at times we didn't. When we talk about new technologies, we 
are talking about planning. 

SUR, I'm going to just hit on briefly, because there is some definite 
discussion on it in great length. SUR is a neat concept. If you put it 
in full-blown, it's very expensive. You get all kinds of reports, reams 
and reams of reports, thousands and thousands of providers, all of whom 
are potentially abusing and misutilizing the system recipients. 

Then you look to your fraud and abuse contingent and you say, "Okay, 
guys, we've given you 2,000 this quarter; go out and get them." They've 
only got forty people. The guy turns around and he says, "Well, that's 
really nice; I now have another 2,000; I've got file cabinets that have 
8,000; I'm two and a half years behind in my investigations, and I don't 
need another quarterly run of reports." 

So we started looking at SUR and saying, "This is nice, we're gener- 
ating the data. Is it cost-effective? Is it efficient?" In our review, 
we were trying to find a better way to use SUR to meet our needs for 
fraud, abuse and for recipient overutilization, trying to find a way to 
minimize the reports that are being generated, but to maximize their 

Being discussed here, is the new MERS system, in which I'm very 
interested. I've sat in many conferences in the last couple of years 
where people have talked about SUR and said, "Gee, it's a nice system, 


but, we really aren't sure we're getting our best out of it." And maybe 
MERS is a modification or an answer to some of the apprehension. 

We have, and are in the process of trying, a new thing called selec- 
tive editing, which I won't elaborate on today. If you're interested, I 
will send you whatever material you want. Basically, what we're trying to 
do, in utilization of SUR, is identify providers so that we can review 
claims on a prepayment basis instead of pay and chase. Selective editing 
will give us the capability of being provider specific — to change the 
fatal level for a given provider on an edit, to cause it to pan the 
world for everybody else; it may be an information-only type edit. It 
will give us the capability to have all his claims for a given procedure 
or a series of procedures to pend for manual review. So when you have a 
provider who is either violating a program you've identified administra- 
tively through one of your administrative controls — a number of items a 
service is given in a period of time — or is billing you for a whole set 
of lab services instead of the panel test that you're supposed to be 
paying for, you have an opportunity to have his claim come out on a 
prepayment basis for manual review. You can make a determination to 
either prove it or reject it. So we'll be doing these kind of determina- 
tions on a prepayment basis instead of a postpayment basis. 

Providers who are identified will be tagged on the SUR and we'll use 
the SUR reports for the follow-up and back-up, and for subsequent re- 
ferral . 

We went through and we did a comprehensive study of our system back 
in 1976. We spent five months looking at the system, and came up with 73 
recommendations. One of the recommendations was to go and change to a 
very sophisticated micrographic , high-reduction system, which was basical- 
ly going to eliminate all paper. And it never got to that. You talk 
about new technologies in State government, or in any public agency, the 
one thing that's always forgotten is the 18 months or two years before you 
get an idea, you want something, and you're finally able to get it. The 
time frame ended up with our vendor withdrawing his offer, and our inabil- 
ity afterwards of buying what would have been a good system. We didn't 
plan; had we planned, we could have had it. 

We did make 73 recommendations out of that system, most of which have 
been implemented to date, both from a manual and a systems end. We have 
procured some new equipment as a result of that, which has cut down our 
processing time and the amount of paperflow which, with the claim volume 
we have, is one of the most important things we can do. We spend a lot of 
time looking at new changes in the micrographic area, as a means of 
reducing the amount of paperflow and giving us an ability to process at a 
lower cost. 

We are tied, like all other States, at a time now where money is at a 
premium. They talked about the Governor here talking about no new hiring. 
I don't think that's an exception; it's more often the rule right now in a 


given State. You're required to put out better services and more services 
with less people, and at a lower cost. And if you do that, you have 
to remain as sophisticated as possible, and still be cost-effective. 

We've long operated on a philosophy that the user must understand the 
system he uses, and be responsible for its development and subsequent 
enhancements. We're a very user-oriented system. Our managers are not 
systems-oriented, but understand the flow, interaction and complexities of 
the subsystems that make up MMIS . 

To support this effort, the systems support staff is maintained to 
provide our management with the available options that will provide the 
data or system that is needed to justify the kinds of changes they want to 
make; provide the kind of guidance to give them the options that they 
want and need; and to provide data assistance, not just the shortest 
distance between two points. 

Frequently, if the user doesn't have a lot of input, you go to 
systems and ask for a change, you get just that — the shortest distance 
between two points, and not exactly what you wanted. So user input and 
user definition is of utmost requirement. 

To further enhance this, we've introduced STM70, which is basically, 
structured systems design. We've found since the introduction that, 
because the user is required to sit down in great specificity and define 
his particular needs and the way his reports are to come out, what they're 
to say and the format, there has been a tremendous reduction in number of 
systems changes that are made immediately after implementation of a new 
program, new system or modification. 

We have also introduced the requirement to management whereby a 
systems test is required before any new system or systems change is put 
into effect. The user provides the test data, the user reviews that test, 
and the user signs his name on the bottom of that test, certifying that it 
meets his requirements, wants and needs. This has also served to cut 
down, substantially, these post-implementation changes that so commonly 
exist and that are so very inefficient from a cost standpoint. 

As I said before, we make tremendous use of our provider groups as 
far as a liaison activity, and explain to them what changes we're going to 
make both in system rewrites, introduction of new equipment. We talked 
about OCR earlier; we just changed our optical scanners to a new, more 
sophisticated system. We went back to our provider groups and told them 
why we were going to do it, because again, we're going to have some 
debugging problems. They've been supportive. The new system's going 
to give us the capability to not only read the data that comes in, 
but to microfilm it and put the claim reference number on it simultaneous- 
ly, so we cut out two steps there. We cut out a number or people, and we 
come out with a lower cost overall. We use the provider groups as a lever 
to be able to make the kind of changes we need to be more effective 


managers in the medical assistance program. 

We introduced the use of the Honeywell page printer. It may not seem 
like much, except all the data reports that come out, including the ones 
to providers, are in a completely different format. They're more read- 
able, but the report is smaller and has to be reformatted. Again, we 
introduced that to the provider groups, got a tremendous amount of sup- 
port, and the transition went very, very well. 

Whether you are a public agency or a private enterprise, 
demands upon us are exactly the same. Programs are growing in the numbers 
served and the costs for those services. Each day, there are more regula- 
tions to edit data to further ensure its validity. Each day, there are 
more regulations and ever-increasing demands to generate statistics of 
every category, in every format that's imaginable. The demand is there to 
do it, with no increase in administrative costs. That's a heck of a 

To do this, you must have management oriented to seeking out and 
implementing new technologies that provide these cost-effective changes. 
The challenge is to attain the state-of-the-art in a cost-effective 
manner, to match the sophistication with your needs. 

To accomplish this requires planning, so that the technical changes 
can be on-going, instead of the hop, skip and jump method we frequently 
use and operate under. As managers, we should be forever seeking to make 
the most efficient system; efficiency is what program management is all 
about . 

Thank you very much . 


The Role of Management Systems in 
Combating Fraud, Abuse, and Waste 

Ronald Schwartz 

Deputy Assistant Inspector General 

For the Office of Health Care 

and Systems Review 


Washington, D. C. 


I'd first like to compliment Dick Heim and the Institute for Medi- 
caid Management for the tone of this conference because, originally, I 
fought awfully hard not to be on this program. And that is because it 
seems to me that in most Federally-sponsored conferences, the Feds come 
down to tell all the State folks what new burden we've just laid on you, 
and to tell you our problems and not listen too much. It strikes me that 
I hope this is a permanent change of attitude in which the program 
is really one in which the State people are going to be able to tell us 
what they have learned and the kinds of experiences that they have, which 
we desperately need to know more about at the Federal level. 

I think before I start, it might help if I just give you a brief 
outline of the Office of the Inspector General of HEW, because it's a 
relatively new institution. It started in April of 1977, and, we have two 
old parts of HEW that have been incorporated — the HEW Audit Agency, 
which now has about 1,000 auditors; and the Office of Investigations, 
which will have about 200 investigators. They're strictly criminal 
investigators. Both of those offices, as a matter of their work, continue 
to show a number of individual flaws in HEW programs, and they go after a 
number of individual instances. So we thought it would be useful to 
organize a third branch of the Inspector General, a small staff, which 
would try to look at all these individual instances and see what's wrong 
with the program that allowed these kinds of things to happen in the first 
place. We call that Health Care and Systems Review, and this group is 
trying to look at a number of programs which have been most fraud prone. 
We've taken a look at the AFDC program; we've taken a brief look at at 
least the top ten States of Medicaid and we're taking a look now at the 
social services program. 

And on Thursday, Tom Morris the Inspector General, will be here to 
tell you, in some detail, some of the things we've learned, particularly, 
through one of our matching programs called Project Integrity. 

We've also, as part of our duties, done a number of computer matching 
programs. At the current time, we're running something we call Project 
Match, which takes the current AFDC rolls of all of the States, and 
matches them against the civilian and defense rosters. At this point, we 
expect that about $12 million of State and Federal matching funds will be 
saved just by matching Federal employment rolls against State welfare 
rolls, and the cost will be something about $1 million of Federal expense. 

We've also done another computer matching program which is to take 
the total State AFDC rolls and match them against Social Security earnings 
records. We haven't yet projected how much that's going to save, but the 
City of New York tells us they expect, just as a result of that, to save 
about $9.6 million next year. 

Based on the programs we've looked at so far, we, in the Inspector 
General's office, think there is probably a 90 percent correlation between 


the amount of fraud and abuse in a State program and the quality of the 
State's management. 

As a result, we're increasingly trying to focus our attention on 
problems of management within State programs. It needs to be said, of 
course, that in Medicaid a very high proportion of the problems that a 
State has in running its program are the responsibility of Congress and 
HEW regulations, but once that's said, there's still an awful lot of 
problems that are really State origin. 

So we see our role, really, in Medicaid fraud and abuse, as mainly 
supporting activities to improve State management. If we don't get to 
that, we'll never get fraud and abuse stamped out of Medicaid. 

It also needs to be said that, at the present time, and for the near 
future, the Congress and State legislators and the press are going to 
continue to focus on fraud. It sells papers; it gets votes, and it's 
important; it's important for the integrity of the program that we respond 
rapidly and well to any indication of fraud. I think it's for that reason 
that the Congress, in the last session, enacted the Medicare and Medicaid 
Anti-Fraud and Abuse Act. Section 17 of that Act provided increased 
Federal matching for the States that create fraud and abuse investigatory 
units . 

There are a number of these units that are now operating, and effec- 
tively tracking down cases of fraud and abuse in your States. Unfortun- 
ately, a number of these units will never achieve full effectiveness, and 
the reason is, there are no adequate State records to begin with. A good 
fraud unit, essentially, is at the back end of a well-managed program. 
They're only as good as the leads they receive, and without the front end 
of a good program, which is an automated management information system, 
these fraud units can never function at maximum efficiency and effective- 
ness . 

We believe because of the claims processing and surveillance and 
utilization review capabilities of MMIS , that the universal adoption of 
MMIS would be a very important step to Medicaid fraud and abuse control, 
and it's for this reason that we're so anxious to back Dick Heim in his 
efforts to get a lot more attention to the MMIS in the States. 

Again, MMIS, in itself, will not control fraud and abuse. A State 
with a strong MMIS, but a weak, understaffed Section 17 fraud unit is 
probably not much better off in fraud control than one with neither. Most 
important, we believe that if all that a State has is a strong MMIS and a 
strong Section 17 fraud unit, they are probably no more than 50 percent of 
the way towards preventing, detecting, and prosecuting fraud and abuse. 

The heart of a truly well-managed and effective program of fraud and 
abuse control is a surveilance and utilization control subsystem, adequate- 
ly staffed by knowledgeable and energetic personnel. All of the effective 


fraud and abuse programs that we're aware of have a core unit to perform 
identification of fraudulent or abusive utilization patterns. It's these 
unusual patterns of utilization which are a major indicator of fraud or 
abuse . 

Examination of profiles of services provided to patients can be very 
revealing, as can examination of services provided to single recipients. 
A number of States have had a great deal of experience in this, and I 
don't think I need tell you about some of the individual practices. But I 
do think it's necessary to say that as in the case of claims processing, 
the key to detection of fraudulent or abusive utilization patterns is 
a sophisticated computer system which can analyze claims information to 
generate utilization pattern reports for classes of providers, individual 
providers, classes of recipients, and individual recipients. Thus, the 
surveillance and utilization review subsystem of MMIS is designed to 
provide the necessary profiles. You will be hearing a great deal more 
about this from States which have had operating experience with these SUR 
units, and we can only hope that a number of other States will be able 
to benefit from that kind of State experience. We know that States which 
have adopted the MMIS and a SUR subsystem have had to do an awful lot of 
fine tuning, because the systems' exceptions criteria frequently generate 
so many leads that available investigators cannot keep up with the work- 
load. Other States which adopt these systems should also expect to go 
through a period of adjustment, during which the exceptions criteria are 
made realistic for the State in question. 

Implementation of the MMIS-SUR component serves as the basis of an 
effective detection system, both for fraud and for abuse. Effective use 
of the SUR component, however, implies that adequate personnel are avail- 
able to examine the exceptions reports and to determine which ones are 
candidates for detailed investigation. 

I think that seems to be my main message, however simple-minded it 
is, and that is a number of States that we've looked at, which have good 
MMIS, just have not had the personnel to follow up and staff a SUR unit. 
And it strikes me that without that, you haven't got management, you 
haven't got control of that program. To whatever extent it's possible for 
the Inspector General of HEW to highlight that problem, particularly 
with your State legislators, we intend to do so. 

The implementation of this system requires adequate personnel. 
There's no way around that. Without the adequate personnel to screen the 
exceptions reported and investigate cases that need it, the entire fraud 
control effort is likely to become bogged down in a sea of paper. Small 
staffs are unable to keep up with the volume of exceptions generated by 
MMIS. As Bruce has told you, that's been a problem in Michigan and a 
number of other States. 

This problem should be diminished, however, as the SUR exceptions 
criteria become more sophisticated, and as staff sizes are increased in 


reaction to the new MMIS fraud related workload. 

It should be noted that there's a close relationship between the 
sophistication of its claims processing system, and the number of investi- 
gators required by a State. A manual system or an unsophisticated comput- 
erized claims processing system generally detects only a very limited 
number of suspected fraud cases. Most fraudulent claims are simply paid, 
therefore few investigators are needed to handle the cases detected. 

As the sophistication of the claims processing system increases, up 
to a given level, the number of investigators needed greatly increases. 
The implementation of a moderately sophisticated computerized system, 
which generates many exceptions, will likely require a very large number 
of investigators to follow up the detected cases, even though an awful lot 
of these exceptions may turn out to be entirely legitimate. A large 
number of investigators is necessary because there's no way to identify 
the genuine instances of fraud or abuse without an investigation. 

But as claims processing becomes more sophisticated, the requirements 
for investigations decrease. If the system is programmed to report only 
those few situations which are most likely to involve fraud or abuse, as 
indicated by the results of previous investigations, or through previous 
State experiences, then the fewer cases reported can be investigated by 
fewer investigators, who spend less time working on false leads. All 
very self-evident, but only in a few States are we aware of a very sophis- 
ticated set of screens which has had this success. 

Regardless of the nature of the case detection system, at the first 
level of the investigative process, there must always be sufficient staff 
to review the detection information and make judgments as to the impor- 
tance and priority of the various cases identified. This critical func- 
tion, where it's performed at all, is usually conducted by the surveil- 
lance and utilization review unit, or a program abuse control unit. 

We don't have any evidence to suggest that random complaints, hot 
lines, et cetera, serve as a very effective mechanism for detecting cases 
to be investigated. These sources can be valuable, but they're only a 
supplement to a strong detection system. 

The strongest detection mechanism is the combination of a computer- 
ized claims processing system that provides various types of output 
reports with staffing levels sufficient for the program to be truly able 
to investigate detected cases, and review and supervise providers on a 
regular basis. 

Lastly, we're much encouraged by meetings such as this. We think an 
awful lot of States have made far greater progress in fraud and abuse 
detection than the Federal government. I'm pleased that so many of these 
State programs will be described today. And we'd like to wish you contin- 
ued success and offer the support of the Inspector General of HEW in 
highlighting problems with State legislatures, and with our own Congress. 


An Administrative Approach to 
Utilization Review 

Joseph Chiaramonte, M.D. 
Assistant to the Director 
Medical Assistance Program 

Nassau County, New York 


If I'm a little bit hesitant it's going to be because I don't want to 
duplicate what has already been said so eloquently by the speakers that 
preceded me. I will say that I am a practicing internist. I have affili- 
ation with a PSRO. On the program you will see that I am listed as the 
Assistant to the Director of the Medicaid Program in Nassau County, in 
charge of the Division of Fraud and Abuse. But I do not come here in that 
auspices to address you. 

I am past president of my peer review region. Region 15, Nassau 
County. I sit on the State Council of New York, on the Committee on 
Sanctions; if you talk about frustrations, there they are. I am also 
chairman of my utilization review committee at Mercy Hospital in Nassau 
County, it's a 400-bed hospital, and have had an opportunity to see and 
address those areas of fraud, abuse and waste. 

Members of the Federal government and State government have addressed 
themselves to these areas. I see MMIS as really a tremendous force for 
the future. 

All of us have had experience with computer readouts, data, and so 
forth, and they have been diverse, as has our region. 

Region II, for example, stretches from Alaska to Puerto Rico. How do 
you program a computer to assess the delivery of medical care in those 
areas, right through that whole area? It's impossible. 

If I, as a physician, can bring to the systems people a concept that 
we must address these issues on a regional, State level, and put it in at 
the front end of programming your computers, then only will we be able to 
come out with what Tom Morris and Mr. Schaeffer said: some decent outcome 
data that will help us formulate policy to improve the system and decrease 
the dollars spent. 

I think what I'd like to do, in the short time that's left, is try to 
address the areas: fraud, error, abuse and waste. Waste being not 
measured only in dollars, but more importantly, measured in poor quality 
of medical care given to the recipients of the program. 

I just want to touch momentarily, historically, on legislation. 
Title XVIII, Title XIX, and Title V, were designed to address, to provide 
medical care for those that were elderly, those that were chronical- 
ly infirm, and for child abuse. 

In your packets you will see a yellow sheet and there are black dots 
and black crosses. And if you'll look at that sheet, the black dots are 
what Title XIX mandated; the black crosses were those areas that the 
States could address under Title XIX which would be matched Federally. 


Now, if you'll look down the States, you'll see that some have no optional 
Title XIX benefits, so they don't have the problems to address to Title 
XIX. I don't think that's right. 

If you'll look at some of the other States that are causing part of 
the problem in our expenditures, New York, California, Illinois, you'll 
find that this is where the bulk of our monies are being spent, and fraud, 
abuse, error, are rampant. 

In New York you'll find two blank areas; it used to be all black 
crosses right across, but they cut out chiropractor's services and 
podiatry. But the governor of our State at that time, when the law 
went into effect, seized upon this to grant everyone in our State every 
benefit that would take care of everything from clipping his toenails to 
cutting his hair, and everything in the middle. There was nothing that 
wasn't reimbursable. And the State government has finally found out that 
there are not enough dollars to pay for these services. 

Therefore, it is on their request that systems people develop criter- 
ia, parameters, patterns, profiles that will enable competent profession- 
als to interpret outcome data and develop policy, and reverse or modify 
legislation that is currently on the books, to make the program a success 
and address itself to all of the population of the United States. 

I just want to share with you a couple of definitions of fraud — 
what is fraud? In programming your machine on MMIS, it is relatively 
easy — and I'm not a programmer — but just philosophically I'm thinking, 
it's easy to take a form, and to see if there's double billing, billing 
for two practitioners at the same time, for the same disease or different 
diseases at the same time of day, if there is a surgical specialist 
treating tonsilitis and giving us a fee for service code of a surgical 
specialist . 

The codes that were described earlier this morning imply time spent 
with patients; if you look at them it would take a 72-hour day to fulfill 
the fee for services that provider has billed the system for. 

I don't want to confine my remarks only to physicians because it is 
rampant throughout the whole medical care delivery system — pharmacies, 
labs, vendors of hearing aids, eyeglasses and on and on. 

Error too, seems to be fairly easily identified. Is there a discrep- 
ancy between the amount billed for the service rendered? These areas, I 
think, can be addressed very, very quickly and appropriately. 

The area of fraud, however, is the most costly of all. There is no 
advantage in recoupment; it is not cost-effective, but what it does 
is cut the cancers of those practitioners who do not give quality care for 
Federally and State funded dollars. 


Abuse is the hardest to address. The abuse of the system, how is it 
abused, where is it abused; how can you systems people help us identify 
areas of abuse so that: (a) we can get recoupment for past dollars spent; 
and, (b) develop policy to prevent such practices in the future? 

We heard a gentleman from New York speak about hard dollars that were 
saved once MMIS got into New York City and Bradford ran the program. 

I beg to differ with him, I wish he were here in the audience so that 
he might rebut or question what I have to say. I don't deny that dollars 
have been saved, but those dollars have been saved by preventing erron- 
eously prepared claim forms, and in a few instances, fraud, rather than 
abuse. So, there are monies saved. There are millions saved, but one 
would expect that from a properly programmed system. 

But, again, now I will address abuse, as opposed to fraud and 
error. I think I'll do that by just giving some illustrations of practi- 
tioners and how they do abuse the system, and leave it to you to think 
about methods by which you can program your machines to help the interest- 
ed professionals, the utilization people, to take administrative steps, 
rather than costly legal steps, and take policy steps to eliminate abuse 
from the system. 

We keep on beating our breasts about Medicaid, Title XIX, and the 
abuse on that side. Medicaid is nothing more than the tail on the Medi- 
care dog. 

As I said in the beginning, Medicaid gave us certain mandated areas; 
the States had a chance to enlarge upon those, but they didn't do what I'm 
asking you to think about doing, develop programs that would identify 
areas of abuse to that system. 

So, what happens when you get a computer run on a provider or a 
recipient, and you can go either way: PACE goes on the recipient end; 
other people go on the provider end. What you want to look for and be 
able to look for is when the patient was there, what he was treated for, 
was there appropriate medicine prescribed, were appropriate consultations 
asked for, was there appropriate laboratory work done? 

The only way you can do that is at the computer end, look at the 
printout, but you must go back to the back end to look at the records, the 
claims forms and the doctor's records for the documentation of those 
services rendered. So that unless we have, from the computer people, 
patterns and profiles, we can't go back and look at the records. 

In Nassau County we do have a computer system. It is, admittedly, 
not as sophisticated as a MMIS system can be, and will be, but, as poor as 
it is, from the end of 1976 to now there have been some 14 million hard 
dollars saved, recouped. 


Another issue that wasn't addressed here is how about these practi- 
tioners that don't give quality care, what happens to them? Are they 
eliminated from the program? What happens, in most instances is that they 
are brought in, they're given a slap on the wrist and they go about their 
business . 

In Nassau County, in that time frame that I referred to, we have had 
approximately 20 administrative hearings on providers about billing. All 
of those 20 providers either restored monies that were not properly paid 
for, for services that were not rendered, and 11 of them voluntarily 
withdrew from the Title XIX program for fear that if it went any further 
on appeal, they would lose their Title XVIII privileges, and further, 
their licensure would be questioned. 

So, Title XIX, at least in our area of the country, is doing its job. 
There's no follow up. And this is where you people are going to have to 
help us. 

I mentioned two things, patterns and profiles. The individual is not 
easy to identify, difficult to nail on one test, one visit; it's not 
cost-effective. But you look at him, either the recipient or the pro- 
vider, and you develop a pattern. It is miraculous to see a repetition of 
patterns that should not be reimbursed, and, again, I will say, medically 
are inappropriate and not of quality. 

So that when the Congress passed Title XIX, they wanted to eliminate 
a second class of citizens. What, indeed, has happened is we have fos- 
tered a second class of citizen under the Title XIX end of it, with poor 
reimbursement for the vendor and poor services for the recipient , in terms 
of quality of care. 

We had one physician who was earning about $120,000 a year on Medi- 
caid. Now, just imagine $120,000 on Medicaid alone. 

Looking at the profiles that we got, our computer system was not 
sophisticated enough to tell us what the problem was, but it was more 
sophisticated when we went back to the batches and looked at our billing 
forms, that on Title XIX, Medicaid, we had a diagnosis, we had a procedure 
code and we had a fee. And we were billed either the deductible or the 
co-insurance. Now, we went back and got the EOBs, the explanation of 
benefits on the Title XVIII side. And what we came up with was astound- 
ing; there's no diagnosis on an EOB for Title XVIII. So how in the world 
can you match up, unless you have a diagnosis, the justification of the 
service, the prescription of the medication, the laboratory data — that's 
only the beginning. 

We looked at codes. For Greater New York Blue Cross, which is the 
major Title XVIII payor, one code alone covers 13 different procedures. 
So, you have a diabetic, which we could identify on the Title XIX side; 
he went to see the doctor for diabetes, but he received a code of 80-31. 


And you look in the manual and it had everything from chlores terol , 
triglycerides, urine analyses, name it; so there was no way. 

I wish there was somebody in the audience that would address this: 
are we locked in to paying for those services that Title XVIII has okayed? 
Is Title XIX locked in to paying? We have been, because nobody has been 
able to tell us otherwise. 

One day we got a dump on the guy that was earning $120,000 a year.* 
On that particular day he visited some hundred patients in one area of 
town, and all had the same diagnosis, CHF, congestive heart failure. The 
claim was clean, had his code number, had a diagnosis, had a proper cost, 
went right through the machine. And the way he was identified was because 
he was a high provider. 

We went back to his records, looked at it and found no evidence that 
these patients were being treated for congestive heart failure. Further, 
the investigative team went to the locale where he was practicing — it's 
a ghetto, an area where people live in adult homes, hotels — and he made 
regular rounds, and an announcement was made to these mostly senile 
people, "The doctor is coming, line up." 

So when we walked in we saw the line. There was a room where the 
doctor was, and there was a nurse outside the room that took blood pres- 
sure. We walked into the room and lo, and behold, there was no examining 
table, there was a chair, a round table and he was examining somebody with 
a stethoscope, with the patient fully clothed, and this is what we were 
being billed for, by this practitioner. 

What do we do? We said, "Well, maybe we're wrong, let's ask him to 
come in and bring some of his records. And let's have an administrative 
hearing. Let's give him a chance to describe what his practice is." 

And so he came, and he came with his lawyer. So, we got our lawyer 
— you always have to have a lawyer with a lawyer. In just a few hours 
this individual asked to be relieved of any Title XIX patients. 

I heard today, too, one of MMIS ' claims to fame is the ability to 
turn around a billing in 10 days. I ask you to think about it for a 
minute, is that really what you want to do as a parameter of measurement 
for an effective system? Is it not more effective, in developing those 
profiles and patterns, to hold those claim forms where there is question 
as to fraud — I'll leave error out because I'll say that we've already 
taken care of that — and abuse until your professionals can look at the 
medical record (which is the patient's property, not the property of 
the physician, the State or the Federal government)? The privilege that 
the payors, the insurance companies have, is to go in and look at those 
documents . 

If you look at the contracts on Medicare and Medicaid, there's a 


disclaimer on every one of them, and on Blue Cross and Blue Shield that 
says, "I hereby give release to the payor of this claim to examine my 
records for propriety," and so that's where we have to go. That's where 
you people have to help us, and this is where we should work in the 
partnership that was alluded to by Mr. Morris and by Mr. Schaeffer. It 
has to be a partnership. 

Wherever there's a practitioner that is not giving quality care — is 
fraudulent and is producing waste — it is axiomatic that around him those 
people that he refers to, those laboratories that he uses, those pharm- 
acies that he uses, are in collaboration, and those patterns have to be 
considered when you develop your matrix. 

Your matrix must mesh between the primary provider, and it should be 
cross-indexed so you can look at a provider by a laboratory; you can look 
at a laboratory by a pharmacy, and I'm sure the expertise in this room can 
develop that . 

What I ask is that you get input at the front end by those health 
care professionals that are able to recognize abusive practice, fraudulent 
practice, and waste. You produce those programs that will identify these 
patterns and aberrant profiles, so that those competent professionals will 
be able to examine them, make decisions as to their propriety and then 
make recommendations which will result in one, recoupment and two, 
policy which will prevent further waste. 

I could go on. I have many, many more examples. There is enough on 

the books now, in the way of legislation, policy, to enable the Federal 

Government, and more important, the States to examine these people while 
MMIS is being developed. 

We heard a gentleman from Nebraska tell us it took six years for 
their MMIS to get operational. We heard someone from New York say that, 
even though they can't predict when MMIS is going to become effective in 
identifying these areas, they are going to take it over and eliminate the 
regions. That is not your problem. That is the problem of the legisla- 
tors; it's a problem of Mr. Schaeffer; it's a problem of the people in 

We honest professionals make up the bulk of the vendors of medical 
care. How I hate to be addressed as a vendor, not that I think any less 
of the guy with the pushcart and the oranges, he's a vendor too, but we're 
doing different things. 

I'm not going to go any further. I'm satisfied with what my frustra- 
tions are and with the direction that perhaps you might want to go. These 
are the people in the public sector, that run smart programs; there are 
PSROs that are doing their job; there are private corporations that can 
contract for this type of examination. 

Thank you very much . 


Medicare/Medicaid Integration Projects 
Status and Systems Impact 

Lawrence Levinson, Deputy Director 

Office of State Operations 

Medicaid Bureau, HCFA 

Washington, D.C. 


When HCFA was created, one of the purposes was to see whether we 
could start putting Medicare and Medicaid together, not necessarily the 
programs together, but the administration. Are there areas of commonality 
where it makes sense to have the programs operating the same way? After 
all, the basic purpose of the programs, financing medical care, although 
for different groups of people, is a very similar one. 

A work group was set up last year. It identified 40 areas for 
potential integration. Of those, 20 were selected, and I'm going to talk 
to you today about that first group of 20. 

What I'd like to do, very briefly, is tell you how we work. We're 
working on a project management basis. Each of the issues has a project 
team headed by a professional either in Medicare, Medicaid, or the Health 
Standards and Quality Bureau. Working with each of those teams is what I 
call a shadow team from the American Public Welfare Association, represent- 
ing the State Medicaid directors, so that the teams are working closely 
with representatives of the Medicaid program. 

I must say in all honesty that some teams are working better with 
some of their Medicaid counterparts than others for various reasons. But 
we believe very strongly that we're not going to just come out and, by 
ourselves, tell the Medicare contractors and the Medicaid States what is 
going to happen. What we're going to do is work with you to achieve 
consensus, and I think in many areas we are achieving consensus. 

For the most part there isn't a lot of disagreement on our goals as 
far as what the projects want to do. The differences that we've had so 
far are related more to how we do them. There are a couple of the pro- 
jects, though, that there's a good deal of disagreement as far as whether 
we should be doing them at all and we'll talk about that. 

I will try to concentrate on the ones related to the systems area and 
just go very briefly over the other ones. I've grouped them into several 
different categories. The first group relates to reimbursement in the 
related projects. 

The first one relates to common audit of hospitals. Right now there 
are about 37 States that use common audit, that means Medicaid/Medicare 
share the audit. Generally, Medicare does the audit; Medicaid uses it. 
We'd like to do something about getting all of the States into this. 

Simply, what we've done is we have a memorandum of understanding 
that's been agreed to but not yet signed between the two bureaus saying 
that, when it's signed henceforth and forever, since Medicaid is entitled 
to the information anyway through freedom of information, it's wrong for 
us to ask for cost sharing. So we're going to stop asking for cost 
sharing, and we're going to let you have what you're entitled to. 

We're also going to say that, if there are additional pieces of an 
audit that you want to do, you can go ahead and do them, over and above 


what Medicare does, and that'll be reimbursed separately at the regular 
administrative cost basis. I don't think, however, that we will reimburse 
you for the same audit that Medicare has already performed if it really 
meets your purposes. 

We have a project on uniform cost reporting and accounting system. 
This is one of those that everybody doesn't quite agree with. It's called 
SHUR. You've probably heard of it. The notice of proposed rule making 
was published on Tuesday. Probably 3,000 copies of the package have 
already been sent out to people who have asked for them. Anybody who's 
interested in it can write in and get a copy of it. We have a period for 
comments . 

This is a very important piece. This will allow us to have the same 
kind of cost reporting system in Medicaid/Medicare ; it'll allow us to 
better compare costs by institutions, and it will allow us to limit 
institutions' ability to maximize costs between the two programs. As you 
well know, providers have some very clever accountants, and they do some 
legal things to us right now that are costing us more money than we think 
they should. So we're working towards eliminating those loopholes. 

We have another project on a common overpayment recovery monitoring 
system. This is something that's going to be affecting you. In Medicare 
we know what providers have overpayments. Now, basically, we're talking 
about institutional providers, but it's going to be extended eventually to 
non-institutional providers, too. We know in Medicare who owes us what 
and why. HCFA doesn't know that on the Medicaid side. Some States know 
that. Some States don't have as good accounting systems as they should 
either, as far as monitoring overpayments. 

What we'd like to have is a system that will allow us to combine 
Medicare's overpayment monitoring system with Medicaid's, so we can make 
comparisons and see if this hospital owes Medicare money, does it owe 
Medicaid money? Does it owe it for the same reasons? When you get 
into common cost reporting, you get into common audit. Then it only makes 
sense that you have a common recovery system or at least, common monitor- 
ing system to know what's happening with overpayments. 

This is at the stage now where the project manager in Medicare has 
prepared a proposal, given it to the Medicaid bureau, which did not agree 
with the proposal and has suggested some alternatives, most of which are 
unprintable, but we're going to work with it anyway. 

I think Medicaid's point, and it's a good one, is that it's going to 
require a lot of bookkeeping, and the question is, "Is it necessary for us 
at the Federal level to have all of this information?" Perhaps it's only 
necessary for the States to have it in a certain format that then they 
could just provide it to us on an as-needed basis. This, at least, is 
their position and we will be discussing it with them further and we'll 
try to reach a compromise . 


The next group of projects relate to claims processing, and there're 
seven of these. The first one relates to common provider identification 
numbers. And this is one where we now have a draft paper; it's been 
circulated through HCFA; it's been given to the APWA. They have a steer- 
ing committee, headed by Tom Russo, State Director of New Jersey, and 
we're giving him all of the information. I think for something like this 
where we've got a document he will probably use a different approach as 
far as getting comments from the States; he'll deal with selected people 
as far as getting their comments. 

I want to emphasize that for the most part we're talking now of first 
drafts, early pieces. We're not talking about going through the regular 
prior consultation process through Medicare, which will have to be done, 
and we're not talking about getting the normal comments that we would get 
through Medicaid, which will be done. We're talking about getting enough 
information that we can make what we think is a reasonable decision based 
on reasonable input, and then when we think we know what we want to 
do, at that point, we'll go out to the regular process to get comments. 

There will be a common provider ID number — the paper suggests this 
— for institutional providers. The six digit certification number now 
used by Medicare and a number of Medicaid States, will be used for hospi- 
tals, SNFs, ICFs, Christian Science Sanitaria, all of the ones that are 
now covered in that process. 

For non-institutional providers, it suggests that we use Social 
Security number and/or EIN, depending on whether or not we're dealing with 
an individual practitioner or whether we're dealing with a group. There 
are problems that we're facing right now using SSNs in a group setting, 
especially with physicians who are in a group and also have an individual 
practice. We're looking to see how we can deal with that. 

How would we implement this? We understand, first of all, that we're 
not going to be implementing everything tomorrow. We're not going to be 
coming down and saying, "Okay, this is what it is and two months from now 
you've got to have it." 

For those States that have fiscal agents, we will, and this is what 
the paper suggests, probably let you wait until the end of that contract, 
and then when you renew the contract, depending on the time frames again, 
at that point put this in as a requirement for your fiscal agent. 

Now, in those cases where you've got contracts that are running 
several years, three or four years, and that are just beginning, I'm not 
sure that we can buy off on that, but there will be ample time for imple- 
menting this. 

As far as costs are concerned, we're estimating that this is going to 
cost us about $4 million. That assumes 90 percent match for MMIS certified 
States and the regular match for others. 


By the way, we have authority now to do this without seeking addi- 
tional legislation. Some of these proposals we do not have authority to 
do right now. There are a couple of legislative packages being prepared 
and one will allow the Secretary to mandate certain requirements, setting 
certain standards and this sort of thing. This assumes that OMB approves 
it and the Congress approves it. 

These are the kinds of things we're thinking about; whether or not 
they finally get through, we'll see. And in those instances where we 
don't have authority now, if we don't get the authority through legisla- 
tion, obviously they're not going to be taking place. But this one we can 
do now. 

The next one is a Common Medical Procedural Terminology and Coding 
System. CPT-4, is the proposal of the team. Twenty-nine States are now 
using a five-digit number plus a modifier and sixteen are using a CPT 
base . 

This proposal would have the least harmful effect on Medicaid and 
would have a more harmful effect on Medicare. CPT-4 is a good system 
insofar as it identifies very discrete procedures. It's a very detailed 
system. For instance it provides something like five or six different 
kinds of office visits. On the other hand, by using such a detailed 
system, we do run the risk of significant inflation in the reimbursement 
practices with providers having a tendency to indicate the more expensive 
of selected practices. 

At least on the policy level, we're not going to have specific 
reimbursement rates for each one. Probably there will be some other 
procedure, either grouping them so that any office visit gets the same 
amount of money regardless, or some other way of dealing with it. 

program money. 

We're expecting an implementation schedule. I haven't seen it yet. 
Again what we're dealing with is draft papers that have to go through the 
regular process within HCFA; the Administrator has to sign off on them, 
and we then have to go through comments in other parts of the administra- 
tion before we actually implement. 

So we're talking probably about implementing these difficult ones at 
the earliest at the beginning of the fiscal year which is nine months from 
now and it probably would be later than that. That's my guess. That's 
not official HCFA policy, but, then again, nothing that I'm telling you 
today is official HCFA policy. 


Common Claims Forms for Physicians — we thought it would be a nice 
idea for physicians not to have to have a Medicaid claims form, a Medicare 
claims form, a Blue Shield claims form, an Aetna claims form, Travelers, 
etc. As you probably know, there's been a group working with the AMA and 
the health insurance industry on a common claims form, and that is the 
form that we are recommending. We call it the AMA form or the health 
insurance claims form. 

Now, there are several problems with this. The form as it's designed 
does not provide enough detail for most Medicaid State agencies, and we 
know that. What we're proposing is a revision, which will provide what we 
believe will be enough data elements to satisfy probably almost all of the 
States . 

But we recognize that there are still going to be some States who 
will insist on using additional data elements for their own internal use. 
There will be space on the form for that to happen. Basic forms will be 
identical, though. We think that this is a good idea because it will make 
it a lot easier for physicians to bill; it'll be easy when we're dealing 
with crossover claims, which we'll discuss later; it'll be easier if we 
ever get to the point of a single fiscal agent for Medicare and Medicaid 
processing the same kinds of claims. 

So we think that these three particularly — Common Provider Number, 
Common Coding System, and Common Billing Form — are very important on the 
operational level as far as bringing the programs together and making 
sense . 

A cost estimate here is around $2 million. That includes something 
like $300,000 just using up stock on hand. The proposal by the team is 
that the government would print the form and provide them to Medicare and 
Medicaid free. I'm not sure we're going to buy that, but we might, and 
provide it to other organizations at cost. That's the proposal; whether 
it will finally get out in that form, I'm not certain. 

We have discussed this with AMA. Of course, we've been working very 
closely with them, and we've reached agreement where we have to reach 
agreement with them. 

Uniform billing and discharge data on the institutional side — this 
is a single project, but it really breaks down into two pieces, a uniform 
bill and the famed UHDDS, Uniform Hospital Discharge Data Set. 

As far as the uniform bill is concerned, UB-16 is what is being 
experimented with now. A demonstration is going on in Connecticut, and 
one is going on in Arizona. New York State is using UBF-1 — and there 
are a couple of other States thinking about trying it out. 

It's difficult for me to tell you what's happening with UHDDS. It is 
being worked on a different level; with the Public Health Service. 


There's a task group set up. They will be working on a notice of proposed 
rule making for a reg that may come out in March. What exactly it's 
going to say, I don't know. 

Now, I have a problem with the way this project is working, because 
it doesn't seem to me terribly logical, especially on the provider side, 
to be dealing with all of the conversion costs that you're going to have 
to deal with in new forms, if a lot of your providers are already dealing 
on tape-to-tape. Do we really need to have a discharge data set at the 
end plus a paper bill on this end? Is there some way that using the 
technology that exists today, and that we expect will certainly exist 
tomorrow, to come up with a simple method perhaps using one of those 
documents to service both purposes, perhaps doing away with paper alto- 
gether and dealing with tape-to-tape, perhaps doing away with billing 
entirely and working some other way? 

So while we are dealing with these demonstrations that we're working 
on, we're also taking a look at the whole issue of provider billing and 
provider data sets and seeing if there's a better way to do it. 

One of my favorites is one innocently labeled Common Application of 
Level of Care for Skilled Nursing Facilities. Medicare and Medicaid use 
the same regulations when they determine level of care for patients in 
skilled nursing facilities in those two programs. However, the guidelines 
that they use in actually determining whether or not to pay for those 
people are not the same. 

We had thought that what was happening was that Medicare was too 
conservative in its interpretation, thereby costing Medicaid money by not 
paying for people and for days that Medicare should be paying for; at 
least this was the Medicaid point of view. However, we have been doing 
some analysis and we found a couple of things. 

One, Medicaid isn't entirely blameless, insofar as they're not paying 
for things that they could be paying for now under the regulation, but the 
guidelines either don't take into account the new reg which was about 
four years old, or else for other reasons the States have limited money, 
and ways they limit that money is by saying, well, we can just pay for so 
many days or so many services . 

So, that's one piece of it. We're going to get them together. We're 
going to get them common guidelines; we're going to make sure that they're 
interpreting these the same way, so that if both programs look at a bill 
they're going to come out with pretty much the same answer most of the 
time . 

Second piece, though, is as we're getting into this, we're finding 
that a lot of people in skilled nursing facilities shouldn't be there. 
They should be perhaps in an ICF level of care. This creates a whole new 
can of worms, because it's a lot of money that we're talking about. If 


that's right, then, there's going to be real problems as far as who's 
paying for what and why, what the Federal share is going to be, getting 
new regulations and new requirements as far as the interpretation is 
correct to make sure that you only pay for ICF — when it should be an ICF 
level, and SNF when it should be an SNF level. This is an unexpected side 
achievement I guess, of this group, to find this out, and I think it's 
going to cause a problem because it's going to be a lot of money that's 
going to cost the States. 

Common coverage for laboratory services is finished. The first one 
was done by the people in the Division of Information Systems in Medicaid. 
Bob Young was the project manager, and I think he deserves some thanks for 
getting it done first. It's a relatively simple one, not to take anything 
away from Bob, but it's something that's been bothering people for a long 
time. States have been paying for services in labs for which the labs 
are not certified. 

It's one thing to say that the lab is certified; it's another which 
services the labs are certified for. We know that very often they only go 
to the first level, so if the lab is certified any bill gets paid. We 
provided instructions to the States reminding them of the regulation that 
exists, telling them what they have to do. We have provided them with 
listings which will demonstrate which labs can do what to whom. Medicaid 
has put out an action transmittal saying that it will be part of the 
MMIS certification process from now on, and we will be monitoring it. 
We'll be monitoring it through BPST, which you use, and we'll be monitor- 
ing it through the State assessment process to make sure that you're only 
paying for those services that you should be paying for. 

Processing of Medicare and Medicaid crossover claims is one of the 
most complex projects that we're dealing with. How do we straighten out 
the problem for these approximately four million people, fifteen percent 
of the recipients in the program, who are entitled to benefits under both 
programs? Medicaid is supposed to be the last payor, and you know the 
problems with third party liability. This is a piece of it as far as 
Medicare is concerned. 

This relates to another project that we have, so I'll talk about them 
both at the same time. What we're doing is a couple of things. One is 
we're trying to get changes made to the HI master file to make sure that 
the information that the States need to determine eligibility is 
available . 

We're making changes to the BENDEX, which is the basic tape that 
comes in that tells you who's entitled to what, so that it will provide 
information that you need. We're going to provide some procedures so that 
BENDEX goes both ways; it comes to the States; you do some things with it, 
provide it some information; it goes back to Social Security; they update 
their files; and it comes back again. It's going to be a circular pro- 
cess, and we're going to try to keep it as current as possible. So the 
data exchange between the two programs is one piece of this project. 


We're going to improve that, and it's going to be improved shortly, we 
hope, rather than taking a long period of time. 

Secondly, we're looking for demonstrations to see whether it makes 
sense to have one program process for both. Initially we had said, well, 
we thought Medicare would do it for both programs, and then we said, well, 
maybe that isn't fair, maybe Medicaid could do it also. Now, we're sort 
of coming back around and saying well, we don't think it makes a lot of 
sense to have Medicaid do it, because they would have to be duplicating a 
lot of systems that Medicare already has. 

We have one demonstration that we're working with now in the State of 
New York, using the Division of Direct Reimbursement in Medicare, the 
Health and Hospitals Corporation in the city, and New York State's DSS, to 
see if we can come up with a system where in those cases where there's 
dual entitlement, they come into DDR; DDR pays both pieces, sends it back. 
We think that it will work. We think that it will wind up with getting 
HHC paid quicker for the whole piece, and we think it may be a way to 
go. As I said it's only a demonstration. At this point we're still 

We're interested in some other sites for a similar kind of a demon- 
stration. We've received some suggestions, some offers from some States 
already, and we're responding to those. If you have other proposals, 
please let us know. 

We have a number of projects that we say are management related. The 
first one is common PSRO monitoring procedures. We thought it made sense 
to have Medicare and Medicaid using the same monitoring procedures, PSROs. 
We learned that neither program thinks that true, nor does HSQ, nor does 
anybody else, so we cancelled the project. 

What we're going to do is make sure that the Medicaid monitoring that 
goes on is supplemented by all of the activities of Health Standards and 
Quality, that they provide the information to the States, so that you know 
what's going on as far as they're concerned. Then when you do your 
monitoring, you feed it back to them, so that we have as full a set of 
information as possible. This has not been happening because HSQ has not 
been giving the information out, and it's not been happening because all 
States have not been sending the information in. We're going to set up 
some procedures for that, but we're not going to have a common monitoring; 
we're not going to be doing any more than we're doing now as far as making 
suggestions as to how you monitor PSROs. 

Len Schaeffer mentioned performance standards on MMIS. We're taking 
a look at the whole issue of standards, starting out with fiscal agents, 
Medicare and Medicaid, to see whether it's appropriate to have any common 
standards between the two programs. 

With all of these, except for the ones we've already got papers that 


say, "Yes, we should do it and this is the way we should do it," we're not 
going in with the point of view that this is what it should be. It's the 
point of view: should this be and if so, how? We want to see whether or 
not it's appropriate to have common standards. If we do have them, at 
this point, they will probably start out at least basing them somewhat on 
the Medicare standards, since they are something that exists right now, or 
will exist shortly when they complete them. We will look at those and see 
how they fit. I'm not certain that we will be using them extensively. I 
think that probably over the long run that it will only be a jumping off 
point, and that you'll see a different set of standards. 

We have a project called Common Workload and Administrative Cost 
Reporting by Fiscal Agents. We'd like to have common measures between 
Medicare and Medicaid, for: how long it takes to process a claim; how 
many claims you have on hand and how many days work you have; what your 
workload ratios are; what your production is; and what your administrative 
costs are. And then we'd like to be able to make some comparisons. Can 
you compare a fiscal agent from Medicaid with a contractor for Medicare? 
Well, certainly, sometimes you can't, but sometimes, perhaps, you can. 

The problem that we've been facing basically is one that I'm sure 
that reasonable people can resolve. It relates to the definition of a 

Medicare defines a claim basically as a piece of paper that a physi- 
cian generally will send in for an individual claim and for an individual 
set of services, which could be over several days, or could be different 
kinds of services. 

Medicaid's definition is basically that of a line item. For each 
line item, they're calling that a claim. As you can see, there's a good 
deal of difference between the two definitions, and we're striving, 
mightily, for compromise. It's a very difficult process, and I think 
what's going to finally happen is that we'll decide not to define a claim 
at all, and just do something else entirely. 

Joint review of fiscal agents — there are ten States now which enjoy 
the same fiscal agents that Medicare does. For those, we'd like to see if 
we can have a single review do the Medicare and Medicaid review. What we 
mean is not necessarily 86 people come in for three weeks and stopping the 
operation while we are reviewing. Probably what it means is that it would 
be based on the kind of review that Medicare does now, a contractor 
evaluation program. It takes pieces of the program, reimbursement, 
claims processing, administration, and does a piece and then does another 
piece in another month, so that it's much less disruptive to the organi- 

What we want to see happen for those pieces where it's likely that 
there will be similarity, for instance, provider reimbursement, is have 
Medicare/Medicaid go in together. Why should Medicare go in and Medicaid 


go in a month later? For those obviously where there is no similarity, 
there's no point in doing them together. But we are going to try to 
reduce the burden on the States and the fiscal agents by doing the single 
reviews like this. 

A further goal of this would be to have a similar review process 
between the two programs. As we move towards getting the two programs 
more similar, it becomes more logical. At this point it isn't obviously, 
but in a year or two, when things start to change, when we start getting 
common claims and common numbers, and all these things, then it would make 
more sense . 

We have a project called "Common Terminology and Policy Systems 
Contract and Financial Management" and that's related to another one which 
deals with consistent regulations and policy documentation. 

We have defined some common terms, you know, secretary, administra- 
tor, HCFA, things like that, because, interestingly enough, Medicare and 
Medicaid don't define them the same way, and we're going to make up a 

One of those in the list of the initial 25 is claim. We'll see what 
we can do with bringing the language more closely together, getting 
our regs more closely matched, getting instructions more closely matched, 
this sort of thing. 

We have just sent an NPRM to the Office of the Secretary, and it 
should have been released or will be shortly, on consistent policies on 
issuing and withdrawing agreements for SNFs participating in Medicare and 
Medicaid. What all of that means is that when a SNF starts participation, 
both programs don't necessarily start at the same time. And we'd just 
like to see that they start at the same time, if they meet the same 
requirements it does seem reasonable. 

Common offset procedures : if you owe Medicare money, or if you owe 
Medicaid money, we're going to get reimbursed. If you're in one of those 
programs, we're going to offset against that program. So, if you owe 
Medicare money and you're dropping out of the Medicare program, but you 
stay in Medicaid, Medicaid is going to offset those overpayments, and vice 
versa . 

To do that we need legislation. It's in the legislative package now. 
And we assume that when that gets through the process, we will have it and 
you'll then be able to do this. 

The last one that I'm going to talk about relates to EOBs, similar 
and improved explanation of benefit forms. As you know, Medicare provides 
EOBs to all of its recipients who receive non-institutional care; Medicaid 
does this on a sample basis. 


Medicare has really started this project and we're sort of tacking on 
to it for Medicaid. Medicare is trying to get a better EOB, one that 
makes more sense to the recipient. Because you know, if you've seen them, 
very often they are indecipherable, you just don't know what they mean. 

We're going to put them in a format, that shows in very simple 
language what happened, to whom, by whom, for how much. And it will say 
something like "Doctor Smith took out your gall bladder, he billed "X", we 
paid him "Y" , and, why we paid him "Y" . 

In addition, we're working now with Medicaid and we've got a task 
group set up now to try to do the same thing on the Medicaid EOBs, to try 
to provide language that you can use; it will be computer generated and 
you'll have stock language that says for a cholecystecdomy, this is what 
you say, and for this, this is what you say. 

And we're also going to try to have the form look similar, so that if 
you're a cross-over claimant and you receive an EOB from both programs, 
you'll know that that's what it is, they're going to look alike. They may 
be a different color, they're not going to be identical, but they will be 
similar . 

That's the projects. Now, let me say a couple of things I forgot to 
say about the common claims forms for physicians, the non-institutional 
piece. One, we are working now on developing on OCR readable form for 
those States that use optical scanning. We are aware of the issue and 
we're not going to ignore you. 

Secondly, the 1490 that Medicare uses now is adequate for its needs, 
so they don't really need any changes. But it's a much simpler form for 
beneficiaries to use. And a good portion of Medicare bills is from 
non-assigned claims, where beneficiaries submit the bills to Medicare. 
The health insurance form is so chocked full of data elements that a 
beneficiary who is over 65 will probably need a magnifying glass to read 
it and they're going to be unable to fill it out. 

What Medicare is doing now is experimenting with a short form 1490 
designed just for non-assigned cases; a very simple thing, a big piece of 
paper, with big blocks, it just says: name, address, social security 
number, and probably signature, one or two other items, and you staple the 
bills to it. We're going to try to do the same thing with this bill so 
that beneficiaries will also be able to use this, too. 

We started out with 20 projects, we finished one; we've closed down 
one and we have combined two, so now — what does that come out to — 17? 
The number 20 has all sorts of mystical meanings. So, we're going to try 
to add three more projects. 

Let me see if I can think of three: common beneficiary identification 
numbers, a very logical extension of common provider ID numbers, common 
claims numbers and common claims forms. 


This was one that was in the initial group to be done, but it was 
taken off because we found out that Social Security was going to be doing 
some things to its numbering system, not to the basic nine digit number, 
but as it related to Social Security claims. Because of that and because 
we understood it was coming relatively soon, we did not want to get into 
this and then have to change again. 

We now understand that the target date for Social Security's imple- 
mentation is around 1984. And if that's so, and we're going to be verify- 
ing that before we go ahead, we're going to introduce common beneficiary 
identification numbers to our integration activity. I don't know what 
number we're going to use, but I would not be surprised if it was a Social 
Security number. 

What I'm saying to you is this whole presentation is based on what 
our experience is so far, it does not at all reflect HCFA policy. I have 
to say that because I don't want you to go out tomorrow and change your 
whole system because I said we were going to have a nine digit number. 

We want to take a look at the quality assurance programs that exist 
in Medicare and Medicaid and see whether there can be commonality, and if 
so, what it would look like. 

We want to take a look at systems, Medicaid systems, Medicare sys- 
tems. Medicare does not have an MMIS and they have certain standards 
their processes have to meet. Medicaid, of course, has MMIS in a number 
of States and more States are joining. We'd like to see if there is any 
purpose of having a similar system between the two programs, and, if there 
is, should it be MMIS or a derivative, should it be something else. 

Again, all we're doing right now is just taking a very basic look at 
the issue of systems in the two programs and seeing what gives and what 
should be happening over the next few years. 

My experience has been that MMIS is a much more comprehensive system 
than what Medicare has. And it's conceivable that we would see whether 
MMIS fits in the Medicare mode and whether it would pay them to start 
introducing that. I'm not sure that it does, we'll just take a look at 

One of the things suggested was that we experiment with a single 
processor for Medicare and Medicaid in a State on a demonstration basis. I 
think it's a terrific idea; it should be a lot of fun to try it and see 
what happens with it. There's a lot of similarities, we think, and that 
would then give us a chance to test to see whether MMIS or something like 
that works in a Medicare mode. 

So, we are beginning to take a look now at the concept of a unified 
claims process. And over the next several months we will be doing some 
staff work to see whether or not we should be going ahead with it. The 


issue is whether we should go ahead with it, and at this point we just 
don't know. 

Those are, generally, the areas that we're going to be taking a look 
at over the next couple of months to be adding projects. 

I've told you very briefly what we're doing; I've given you some idea 
before many of the HCFA staff have gotten an idea of where we stand on a 
number of these projects, as far as these draft papers are concerned; 
they've only gone to the HCFA executive staff yesterday. 


MMIS Benefits and Evaluation 

Robert Nakamoto, Director 

Division of Information Systems 

Medicaid Bureau, HCFA 

Washington, D. C. 


MR. NAKAMOTO: The program said "a State panel to be announced." The 
idea was that after I summarize the benefits of evaluation of MMIS, if 
there are any hardy State folks left, since we are recording this session, 
you can identify yourself and add to my list. 

In the preliminary agenda, there was an item there called "Federal 
Regulations," and that was scratched because of the lack of time. In your 
packet, there were two regulatory pieces: the Medicaid regulation effec- 
tive October 1, which is a rewrite of the entire Medicaid regulations; and 
the other piece as it relates to the FFP, Federal Financial Participation 
on ADP. 

There are other regulations that we need to pay attention to espe- 
cially in the R&D area, and R&D has its own set of regulations. 
Oftentimes we see R&D applications coming into Washington, or an appli- 
cation coming into Washington for 90 percent money, which should have been 
more properly channeled, and there is some back and forth that takes 
place . 

You also need to be aware that the competitive procurement regula- 
tions are being updated by 0MB. There was a new set that was announced, a 
Notice of Proposed Rulemaking. The White House 0MB had a hearing on 
January 20th. The final comments are due January 31, I believe. The new 
Medicaid regulations also have a whole list of sections in there relating 
to fiscal agent contracting. 

By way of emphasis — and Len Schaeffer mentioned this — we do plan 
to get active with what is called the National Technical Advisory Group 
and we will be talking with several other groups while we solicit advice 
from this group. I have already talked to different elements of APWA and 
the National Governors' Conference staff, and they are willing to partici- 

I think Dick Heim mentioned the MMIS Task Force, and he identified 

some of the Task Force members. If you will, I would like to read about 

three or four sentences about the MMIS Task Force and how it got estab- 
lished. This is in the preamble of the MMIS Task Force. 

It says: "working with Inspector General Tom Morris, HCFA Adminis- 
trator Leonard D. Schaeffer has established a Task Force to evaluate 
present MMIS and recommend ways to strengthen it." The primary purpose of 
the HCFA Task Force is to develop and implement a strategy which identi- 
fies specific action steps, be that administrative, regulatory or legisla- 
tive, that needs to be taken in order to maximize the benefit of the 
Medicaid Management Information System through the establishment of 
performance standards. 

Upon approval and acceptance of Task Force recommendations and plans 
of action, HEW managers in each affected functional areas will direct 
specific implementation of actions required for the effective management 


of the Medicaid program. 

We have a Task Force which started about two weeks ago. We are in 
the process of negotiating for a contractor who will be on-board by the 
end of next week. The first set of recommendations will be due the middle 
of March, and if they are accepted, they will be assigned to the line 
agencies in HCFA and will be moving. 

The Task Force life expectancy is about six months, and we will be 
talking to many of you here in this room and others. We will be visiting 
around the States. We do plan to have a one-day meeting for the industry, 
which will be announced in Commerce Business Daily, so that we can have a 
vehicle whereby the private sector, on some equitable basis, can come 
forth with their ideas . 

As some of you in this room know, I always like to come up with a 
saying or two, and the saying that I have come up with — and you might 
have heard this before — goes like this: With an effective management 
system, you can have a chance to succeed in managing the Medicaid program. 
Without one, you are almost assured of failure. I think all of you in 
this room probably realize that or if you didn't when you came here three 
days ago, you do now. 

The benefits of something like an MMIS are almost obvious and do not 

need repeating — you need an information system if you have to have the 

capacity to operate and to operate efficiently. You also need it for the 
purposes of accountability. 

You also need it for measures of cost control whether by paying the 
proper fee, paying for the proper eligibles, whether you are handling 
disallowances, duplicates, third party liability, utilization control, and 
so forth. 

You also need it for the soft dollar avoidance or cost avoidance, and 
the cost savings and cost avoidance may not necessarily mean the same 
thing, depending upon how you define them in your particular jurisdiction. 

One of the things that a sound information system does is that it 
fixes responsibility for organization decision and provides a basis of 
action. In order to have an effective information system and especially 
if you use a lot of automation, the only way you can get automation 
accomplished is by having a basis for making a decision. It also provides 
for flexibility in the sense that as policy changes are made, it is much 
easier, even though it may take a little bit of time at the beginning, to 
program the computer and let the computer make the massive change rather 
than to do it by hand. 

I mean it is inconceivable that you can adjust a professional fee 
schedule, or a drug formulary, or codes as it relates to the eligibles for 
millions of people through a hand operation. 


It also provides, if you put in the right kind of input — and it 
doesn't necessarily have to come through an automated information system 
— but perhaps a combination of what you have in there, plus surveys and 
other kinds of inquiries, the basis for policy changes and legislative 
proposals. It also provides, as Bill Hickman and Al Dobson said, a way of 
reporting on what happens, be that to your legislator, your interest 
group, the Federal government, et cetera, and as Tom Morris puts on his 
list, Number 1, a basis for providing information for fraud, abuse, and 
waste activities. 

That is my simple categorization of benefits of something like an 
MMIS. I would like to come up with another saying. Oftentimes we see 
MMIS put in and left alone, and I say this: To leave an operational MMIS 
system alone is a sure way to commit administrative suicide. 

I think Len Schaeffer kind of hinted at that. When we go out and 
start to revalidate the system, we are going to find some kinds of admin- 
istrative suicides out there. And in order to do this evaluation, I think 
that we need to make a conscious commitment to make a maintenance and an 
improvement project. 

I think there is one significant difference in the so-called new 
regulation effective October 1. It used to be that you got 90 percent 
money for design, development, and implementation, called DDL We put in 
another "I." It is called design, development, implementation, or im- 
provements . 

I think, as States become aware of that, we will be seeing more APDs 
perhaps on an incremental basis as to what is meant by improvements. So, 
if you would read the regulation, we have not defined improvements, but I 
would expect that the States will be coming in with some improvements. 

The other big thing that we probably need to be more aware of — if 
you look at the cost of automation, the administrative costs of automa- 
tion, it is between 30 and 50 percent of the budget. 

I ask the question: Is your organization and is your management 
sufficiently tuned, knowledgeable, et cetera, to handle a technological 
change of that kind of a massive dollar in a large organization affecting 
a large program? 

I submit that most of us, including the Federal government, but 
especially the States, have a long way to go in having experienced and 
knowledgeable managers to deal with the technical change. As we move to 
things like the "less paper" society, instead of printing out reports, to 
put them out on print tape, to make micrographic available instead of hard 
copy, and so forth, I suspect that most organizations, especially if you 
look at top management level, are not really geared to addressing techno- 
logical changes. I think that there should be some homework done in this 
area . 


Well, to sum up, you all know that MMIS is a necessary management 
tool. It is something that you either have to learn to live with, and if 
you can't learn to live with it, you need to do something else. 

With that, I would like to close my comments. If I have missed 
anything in my categorization about the benefits or evaluation, which I 
have oversimplified, I would like the State panel out there, if you will, 
to make some additional final comments. Since we are recording this, your 
name will be in the proceedings if you do have any additional comments. 

You have all been a good audience. I admire the tenacity of the 
group to stay this long with it. I think we have all learned something. 

Thank you. 


PANEL: SUR as a Management Tool 

MODERATOR: Richard Heim 


Herbert Alfasso, New York 

Denise Chuckovich, Idaho 

Linda Stella, Minnesota 

Dan Boyle 


MR. ALFASSO: You know, as John Hall was talking this morning, he 
made a biblical parable about his MMIS certification. I was wondering 
what he could have done if he were in New York State with the director — 
with the name of the director of our MMIS program, Moses — Lloyd Moses. 

Let me go back to discussing the background of the MMIS in New York 
State. New York State is probably unique in a couple of respects, one of 
them is that the Medicaid program was never operated at the State level 
until the enabling legislation for MMIS went through, until that time we 
had in effect 58 local systems. 

So, with the MMIS we were not only able to assume responsibility for 
the program, which we should have done, really, all along — it just lends 
itself to that — but it also meant that we had greater means to standard- 
izing the program in New York State — standardizing because there were 
local variations that were permitted. Of course, it initiated the utiliza- 
tion of EDP or automatic data processing everywhere. Some counties do 
have a very good system in New York State, or fairly good system, some 
have appalling systems; now we'll have a uniform system of data processing 
throughout . 

Now, with the SUR system we are very concerned about the fact that 
SUR had a reputation, and probably still has a reputation, although there 
are many new systems coming into play which eliminate some of the problems 
of SUR — of being a tremendous paper-generator, computer-burner. 

What we did, before we designed the SUR system, was to visit other 
States. We went to visit other counties, those that were doing surveil- 
lance and utilization review; we talked to our users. And we came 
up with about five things that we knew our SUR system had to have. 
We also knew that we had to stay faithful to the Blue Book, and that's 
sometimes a tricky thing to pull off. 

First of all, we knew that the profile — the profile is a series of 
statistical items that we prepare for a physician or a group of physi- 
cians, or any group of providers, or recipients — had to be flexible. We 
knew that the questions that people weren't going to be able to tell us 
now what they were going to need, let's say, three months from now, much 
less a year from now. 

So, the profiles themselves had to remain very flexible. And today, 
for example, we might be interested in the high rollers, high volume 
providers; the next time we might be interested in the providers' prescrib- 
ing patterns to put into play some educational program, perhaps. So, we 
need to have flexibility in the profiles. 

We also needed flexibility in the peer grouping. If we're going to 
group our recipients and our providers, we couldn't very well stay with 
the same grouping patterns, we had to experiment with that. So, we had to 
be able to regroup our providers. 


And SUR did not allow this. Once you decided on how you are going to 
group — let's say your recipients, by age and sex and geographic area, 
you're pretty much stuck with that. We needed flexibility, so that we can 
regroup the recipients and regroup the providers, so that when we do 
exception reporting, we're doing it on the most meaningful kinds of peer 
groups that we could possibly have. And we had to be able to make these 
things on a run-to-run basis, without having to reprogram; that was very 
important . 

The third thing is that we needed to look at every single participant 
in the program. We needed to look at every recipient and every provider, 
but we could not tolerate having reams of profiles being kicked out of the 
computer with many analysts' hours time spent on trying to pick and choose 
among those that they wanted to investigate. We had to have some kind 
of scoring method, some kind of ranking method built into the system. 

We had to keep the amount of paper down. SUR is known to be a 
tremendous paper producer; we had to have a technique for keeping the 
volume of paper down. And, of course, this ties in very closely with the 
ranking device that we wanted to have in the system. 

The reports had to come out on a timely basis. We saw States which 
could not rely on their SUR reports; they had to go to other things. And 
there are other things available because the reports were just not being 
produced on time. SUR, in most States, is a low-priority, heavy volume 
kind of thing for the computer. And this was something that we also had 
to have in our system. 

Our SUR system does an excellent job on all of the flexibility areas 
that I talked about. What we do is we tell the users to tell us exactly 
what he wants for each run. We have a user manual, which tells them 
exactly how to fill in the forms that he must fill in, in order to tell us 
what he wants. It's a control file operated system, but those forms do 
not dictate the control file; what it does is inputs to us. We, in turn, 
take those data and prepare a control file which takes us about a week 
per category of service, to test out and so forth, it would take us maybe 
two weeks. We allow ourselves, I think, three weeks. 

So, that's a much shorter time than it would take if you had to 
reprogram. With those control files you can do all of the things I 
mentioned before, with all of the flexibility that we wanted. I'll go 
into a little more detail about the system itself, in a few minutes. At 
any rate, the system itself as it developed, is like a specialized sophis- 
ticated report writer. 

Now, as you know, SUR does basically, two things: it's a detection 
device and it's a profiling device. Let me describe the profiling a 
little bit and then I'll go into describing the detection. 

In the profile, the user can dictate exactly what he wants to see on 


the report and the content of the report. We have a lot of bells and 
whistles which I can't go into now, but suffice it to say that he can 
write items such as the number of claims, number of dollars, number of 
recipients, those general types of items. He can write very specific 
items, such as number of females between the ages of 10 and 15 who are 
given a specific type of injection. If that's what the user wanted for 
that particular run, he can write those items and have that on the 
provider's profile. And he can develop averages and ratios and so forth, 
based upon these items. In other words, he can have a report which is 250 
to 300 items long, and that will be the profile for the category of 
service . 

Now, in the protection end — and this is very important — the user 
wouldn't use all 250 items; he would only want to make his exceptions on 
the basis of only five items, six items, something like that. The user 
can determine every time he runs which items he's going to use. If he's 
interested in high-volume providers, let's say, he can use items such as 
number of claims, number of dollars, number of recipients, etc. If he's 
interested in something else, he can indicate ratio of first visits to 
total visits, as his exception item. And the processing for exceptions 
will be done only on those items that he's specified. 

The user can assign a weight to those items, so that if he choses, 
let's say five items, some items might be considered more important than 
others. He can assign a weight to the items to give him the relative 
weight that he wants to see. 

This itself, by the way, is not unique with us. Other States have 
had this kind of system, but the ultimate output is that the user's first 
report, when the SUR run is complete, is a severity index with a ranking 
of all of the participants who accepted in descending order. That would 
pretty much dictate his work load. He could just select the first hundred 
people, the first two hundred, this comes out by class group, and have his 
work load determined. He can also force certain people to come out, if he 
wants to. 

But I won't go into all of the options that the user has. It's 
sufficient to say that all of the exceptions are not truly exceptions 
anyway, they are just simply people who deviated from the criteria. He 
may have, let's say, 20,000 recipients who kick out of the system, but he 
wouldn't be looking at more than 1,000. But those 20,000 are not neces- 
sarily abusers of the system, they just simply have a rank of some type. 
At least he has a method for determining which ones really deviated and 
can pick on those. 

What I'm struck by whenever we talk about SUR is the fact that 
invariably SUR will have a low priority in the development and implementa- 
tion of the MMIS, except for two times. The first time is certification 
time. We manage to do a lot of things for SUR during the course of the 
implementation of the MMIS. And the other times that I've heard is when 


the first major run goes through and how much time everybody is now 
surprised at finding out it takes to run SUR. 

Just to give you some statistics so you can compare it to your own 
State. We will have about 2 million recipients. We have over $3 billion 
worth of expenditures. We have 10,000 physicians in New York City alone, 
not counting other types of providers — huge volumes. 

As far as what we've implemented so far is concerned, we've produced 
SUR reports on physicians, on pharmacies, and on clinics. Clinics I don't 
think are very big in most other States, but they're very large for us. 
Out-patient services account for about four or five times the amount of 
money in New York City as does physician services. And we produce SUR 
reports on recipients. 

In the last SUR report we processed 20 million claims that covered 

up to September 1978, roughly 10 months. And we expect that the SUR 

system will have to handle about 80 to 85 million claims in a 15-month 

Now, as far as utilization of the system is concerned, the first 
impact was interestingly enough with the group profile reports, the 
reports that told us what the groups of physicians, groups of clinics and 
so forth were doing. Remember, there are profiles for individual recipi- 
ents and providers, and there are profiles which talk about the group. 

For the first time, we were able to get an enormous amount of infor- 
mation which absolutely fascinated the top management. I don't imagine 
this will continue to occur. But the information we received on physi- 
cians by specialty, which specialties were costing so much, what kinds of 
things they did, these profiles were absolutely revealing. And they had a 
great impact, a great deal of analysis was made that was sent to the 
Commissioner . 

As I said, because of our poor data base, we were not able to get 
these statistics in the past. So, those management summary reports were 
very impressive. We produced management summary reports, obviously, on 
all types and they were interesting for all categories of service. 
Recipients were fascinating, as far as their utilization patterns were 

But that's not the main purpose of SUR. The main purpose of SUR was 
detection of individuals that we wanted to pursue for follow-up. And in 
this area we've done our beginning work with recipients. I didn't expect 
that to be the case, and I'm not responsible for determining which we 
would look at. I guess what occurred here was that there was interest in 
getting some immediate payoffs and New York City was interested in working 
on a demonstration project with us. I think the Secretary of HEW, when he 
was in New York City for a press conference recently, mentioned one of the 
demonstration projects in which we took recipients who were visiting many, 


many providers and those came out of the SUR system. We just simply 
asked the question and kicked out recipients on the item number of differ- 
ent providers. We had one recipient who saw 17 different providers and 
then, one other who saw 12, and then lots of them who saw eight — this is 
in a three-month period. Based on those reports, that detection device, 
we were able to pick recipients — I think 119 of them — and we limited 
them to just one pharmacy per month. 

In his statement Secretary Califano quoted one of the statistics 
which showed that the recipient costs went down, let's say from an average 
of $250 a month to something like $15 as month, obviously a very big 

As far as the provider side is concerned, we have a staff of 10 to 13 
people in the State Department of Social Services. As mentioned earlier 
this morning, you need SUR staff. They are medically oriented, but what 
they were doing with providers is mainly experimenting with the system. 
They are just now about to start making recommendations for follow-up. 

We also had some political problems, or jurisdictional problems in 
the State which tied up some money for SUR, and that was the reason we 
could not quickly get more staff on board. It was about a million dollars 
that we just couldn't spend because of jurisdictional problems. 

Another use for SUR which you might find interesting is the tie in 
with EOMBs. Some States may still be sending EOMBs out on a 100 percent 
basis, I don't know. But since we have the option of sending it out on a 
sample basis, we do. We send up to 50,000 EOMBs a month, which is far in 
excess of what Federal government requires us to send. But it turned out 
to be very useful. Again, this surprised me. EOMBs are tied in very 
closely with SUR because the accepting providers are used as a basis for 
sending EOMBs to recipients. 

There are other ways we can send the EOMBs, but we used SUR to 
determine which providers will be selected, and then from those providers, 
we select a random sample of recipients. This has turned out to be an 
excellent way of targeting in your EOMBs to those places where it would do 
the most good. 

The payoff seems to be very good in two respects. For one, it seems 
to have identified new providers we didn't know about. We did have some 
investigatory work being done in New York State, of course — fraud and 
abuse work. Some providers have been identified as having questionable 
practices, but eqally important, it's identified specifics and specific 
witnesses for people we already had under surveillance. We're changing 
our EOMB form, incidentally, to become more responsive to our needs. 
We need to go back to the specific claim the recipient is talking about 
and, also, to straighten out some questions of clarity on the forms. 

As far as feedback to the MMIS is concerned, we've had a great deal of 
feedback to the rest of the system. On the pre-payment side, on the edit 


side, we've identified questionable claims which were being paid. 

We obviously thought to question the status of some of the edits. I 
guess in some cases when we have a backlog of pending claims we may have 
turned off or turned down some of the edits to pay status, and they turn 
up in our SUR reports. SUR will pick up all the garbage and display it. 
This is why we've been working very hard in trying to insure the integrity 
of the SUR profiles, to reflect accurate claims. Diagnosis edits have not 
enjoyed a high priority because diagnosis on the forms themselves have not 
been considered all that important, but we have been forcing that issue, 
with the diagnosis. In some cases we've succeeded and in other cases 
we're still working on it. 

Provider enrollment has been another source of errors for us. We 
class group providers by type of practice, that is whether they're in 
individual practice, or shared help facilities, or group practice. It's a 
very important criterion and that particular item wasn't considered very 
important when we enrolled physicians rather quickly. We're now going 
back and straightening up the enrollment in order to pick that information 
up because it is very important to SUR. 

Now, I've been asked to talk about dealing with control file systems. 
First, we have to train our users and that takes time. So, that could be 
considered a problem. We need staff on our side to take the information 
and prepare control files a great deal at the beginning of the system. 

The system is prone to control file type of errors which can be a 
problem; you can't test for all conditions, it's impossible. It places a 
heavy responsibility on the user, but I don't consider that a disadvan- 
tage. I wasn't just speaking about advantages. The user knows exactly 
what goes into his reports, he tells us exactly how to define each item. 
There isn't the kind of quibbling you get or surprises, for users should 
not be surprised with what winds up in his reports. And then, also, 
with a system like ours, bugs tend to turn up long after you thought you 
had ironed them out . 

I'll just mention three things dealing with the fiscal agent. We 
prepared the input. Our process: we prepared the input from the users' 
specifications, and the fiscal agent tests it out before it actually goes 
into production. 

During the development of SUR, our relationship with the fiscal agent 
was actually excellent. I think part of the reason was the fact that we 
were breaking new ground and the system itself was very interesting. 
There was a great deal of pride on both the State's part and our fiscal 
agent's part in the development of SUR. 

On the operational side it has not been so sweet, we have had prob- 
lems. The fiscal agent did not really believe the figures about the 
running time and when he put it into practice, we had some problems with 


the fiscal agent background. 

Also, since the user can really dictate how long these runs are going 
by the control files, he can make it run forever. There is some concern 
by the fiscal agent that this could get out of hand. This is one of the 
areas that we're working on now. In fact, we're working on streamlining 
the system to make it a lot more efficient. 

In summary then, I think the SUR system tends to keep the rest of the 
MMIS honest in terms of the kinds of data that we get into it. This is 
going back to it as a management tool and not talking about it as a 
surveillance and utilization review system. It does a lot better job in 
this area than MARS or even the claims reports can do because it goes into 
so much more detail on some of these data elements, and they're not really 
used very much by the other areas. 

It's a very attractive system from the users' point of view because 
he has control over it and I think that tends to foster greater utilization 
and greater understanding of the system, also. 

Also, I should mention that we're under very heavy pressure because 
of the system's flexibility. We're using it as kind of a research tool. 
People who are doing studies, let's say of transporting elderly people to 
New York City with a new transportation device want to use the SUR system 
to see what effect it has had on institutionalization. This is something 
that we have to watch because we have to give priorities to SUR as an 
exception and detection system, and the other use of SUR would have to be 
down-played. But we are under heavy pressure to use SUR as kind of a big 
report writer. 

And that, basically, summarizes New York State's SUR. Thank you. 


MS. CHUCKOVICH: This afternoon I would like to begin by describing 
Idaho's Medicaid program in general and our SUR program more specifically. 
Then I'll get into some of the benefits that I've seen management derive 
from SUR and some of the shortcomings that we've come up against. I think 
you're going to find the difference between Idaho's program and New 
York's to be quite remarkable. 

First, let me tell you something about Idaho and Idaho's Medicaid 
program. Idaho is a small conservative State with a population of about 
800j000 people. Our Medicaid program is also quite small. 

For fiscal year 1979 we had a program budget of $41 million. We've 
got 29,000 recipients and 7,000 providers. Of those 7,000 providers, 
4,000 are from out-of-State . A lot of our recipients live in border towns 
and they go into Washington, Oregon and Utah for their medical care. 

In Idaho, our MMIS became operational in January of 1978, one year 
ago. We contracted with EDS, Electronic Data Systems, who takes care of 
all our data entry, microfilming, claims processing, and generation of 
reports. The State is responsible for all claims adjudication and claims 
control . 

I realize the volume of our program must sound minute to most of you 
from larger States, and you must realize we also have a very small staff. 
Our entire staff, including administrators, professionals, claims adjudi- 
cators and clerical support, is only 24 people. 

I think there's certain advantages to being a small program. System 
problems seem to be more easily recognized and rectified, and our staff is 
crosstrained out of necessity, so we have the background to relate from 
one MMIS subsystem to another. 

In Idaho, as you might guess, our SUR program is also quite small. 
The staffing for the past eight months consisted of only myself. We're 
planning to add a second analyst next month, but up until now I've been 
the only person available to work reports. 

Our SUR program produces provider profiles for eight categories of 
service; we have recipient profiles, hospital reports, and treatment 
analysis. My responsibilities have included working those reports, 
revising the report specifications to meet Idaho's needs, designing case 
development and disposition procedures, and developing some overall 
utilization review procedures. 

Well, needless to say, that's a lot for one person. Faced with a 
shortage of staff, numerous responsibilities, and volumes of reports, I 
decided to direct a good deal of my time towards overall system revisions 
and policy development. While having been involved in several cases of 
individual utilization review, I felt I could be most effective during the 
early months of our MMIS working in more generalized areas. Today, I 


would like to focus on the benefits of this more generalized work to 
our management . 

During the past year, the situation in Idaho has been such that 
Medicaid management needed the kinds of general information SUR could 
provide. Prior to our MMIS implementation our program policy was extreme- 
ly brief and vague. It needed a good deal of development. 

I participated with management in developing a comprehensive new 
policy manual. The people I was working with had a good background in 
policy, but very limited knowledge of the MMIS. I was able to provide 
information to help coordinate policy with the MMIS and SUR. I was able 
to help with questions like how could a new policy be enforced by the 
system; how could SUR be revised to track this new policy from the back 
end; how much system work would be created by a new policy? I also 
provided input into development of the utilization review section of our 
manual to reflect SUR capabilities and the utilization review procedures 
which I developed. 

The second area in which I've seen SUR be beneficial to management is 
that of system revisions. Idaho's new MMIS required a great deal of 
adjustment to become fine tuned to the State. 

During my review of SUR data, I had the opportunity to identify 
numerous procedures which had been paid for, but were not in line with our 
policy. I recommended activation of claims processing audits to catch 
these procedures prior to payment. Activation of these audits brought our 
system into line with our policy and helped to save program dollars. 

I think system revisions is one area where the benefits of my cross- 
training are pretty obvious. I've had experience in claims examining with 
the provider file, the eligibility file, cash control, and I do some work 
with MARS currently. 

With this kind of background, I'm aware of the interrelations of the 
various MMIS subsystems and I'm, therefore, aware of the kinds of work 
that a new audit can create; with my SUR research, I'm also aware of the 
potential dollars to be saved. I can present this information to manage- 
ment with my recommendations. 

The third area where I've seen SUR benefit management is that of 
program utilization. This fall, Idaho's voters passed the property tax 
initiative similar to Proposition 13 in California, and we're facing 
definite budget cuts and probable severe program cuts. 

Facing this, management required research into utilization and costs 
in several categories of service to determine which program cuts to 
recommend. Using my SUR utilization information with MARS budget informa- 
tion, I did several studies for management. We looked at inpatient length 
of stay and rising hospital costs, at outpatient utilization, and the 


utilization in State-sponsored clinics, to name a few. 

This research not only provided important program information to 
management j but also gave me an opportunity to look at my reports in a new 
way. I was able to recognize elements of the reports which could be 
revised to be more effective, both in this kind of research and in indi- 
vidual utilization review, as well. 

I've had the opportunity to utilize SUR to assist management on 
several occasions. I've also come up against numerous shortcomings in the 
reports and in the way that they are utilized in Idaho. When I talk about 
shortcomings, I think it's important that you remember that Idaho's SUR 
unit has only been active for eight months, and that certainly does 
influence my perspective. 

The foremost problem in my mind concerning SUR in Idaho is one of 
utilization. Up until now we've lacked the staff to utilize the SUR 
reports as they were designed. And, from what I understand, this problem 
is not unique to Idaho. 

It seems to me a vicious circle exists, without staff to work SUR the 
way it was meant to be worked, the results are not as effective or as 
extensive as they might be. Without those effective demonstrated results, 
management hesitates to increase staffing. 

The second shortcoming I'm aware of develops from the nature of the 
reports themselves. It's a very lengthy process to adjust the reports to 
accurately reflect your own State. In the interim, the reports lack 
reliability in the eyes of management. There have been numerous times 
when my boss has come to me and asked for some piece of information, and 
I've had to say, "Gee, I don't have it right now, but next quarter we're 
hoping to get it." And invariably next quarter is just too far off. 

It seems that the lengthiness of this initial report adjustment 
period is a fact of life. However, I feel that if States could provide 
for more support and staff time for SUR, earlier in the development of the 
MMIS, this situation could be alleviated and we wouldn't be making major 
report adjustments one year after implementation. 

The third shortcoming I've noted relates to the two I've already 
mentioned. While management is skeptical about the usefulness of reports 
which seem to require constant adjustment and hesitant to increase SUR 
staff, those in management who are not systems oriented are also put off 
by the sophistication and complexity of SUR design. Without some knowl- 
edge of the flexibility of the reports, as well as their limitations, 
management cannot know what is possible to request, nor can they under- 
stand why some information is not retrievable. 

I realize SUR staff has the responsibility to demonstrate the useful- 
ness of reports to management. In Idaho on several occasions, I have been 


able to provide management with information from SUR which has been 
beneficial to the administration of our program. I've also been unable to 
provide that information at times due to the shortcomings I've already 

In SUR I think we have a flexible, sophisticated tool and a wealth of 
potential information. However, from my experience in Idaho and from what 
I suspect is true in other States, SUR suffers from a lack of management 
support and at times management understanding. Hopefully with time, 
experience and increased demonstration of the usefulness of SUR, this 
situation will improve. 

Our experience in Idaho has demonstrated SUR has a great deal of 
potential for providing management with a variety of information useful to 
the administration of Medicaid. I believe we could do a great deal more 
with our SUR program in Idaho, given the opportunity; and, I for one, 
would like to see what's possible for an SUR program with appropriate 
staffing, development and support. 

Thank you. 


MS. STELLA: First, I'd just like to say that New York is not unique, 
that Minnesota also had 87 different county administered medical assist- 
ance payment systems before MMIS was instituted. So we know what a hassle 
it is to try to get the State to pay the whole works. 

In Minnesota the SUR subsystem was installed along with the MMIS and 
was approved in 1975, but during installation there wasn't a SUR staff and 
so we didn't really have much say into what went into the system. And 
when it was installed, two people were pulled out of provider education. 
They both had social work backgrounds, and they were told, "Okay, you're 
going to work with this new system. See what you can do with it." 

Their focus, besides trying to validate the data that was coming out, 
was more recipient oriented. And when I came on board they were working 
with recipient limits, trying to set limits for our first reports that 
were going to come out.. So the three of us were the unit for awhile. 
When we had our first printout in September of 1975, we ended up with two 
cart loads full of providers. We were strictly using two standard devia- 
tions; we didn't do much with it. 

In September of '75, we finally got a director and he gave us a 
little bit of direction for our SUR system. We divided the unit into 
provider area, recipient area and then support services. 

Our SUR division in Minnesota is completely self-contained. We have 
health professionals who analyze the recipient reports; they also have a 
medical background. I am the liaison between what the user wants and what 
we get out of the computer. Then we also have investigators on our staff. 
So, we can carry a case from coming off the computer, to the analysis, to 
the audit, to the investigation, to preparing it for the attorney general. 

Now, as we started using our SUR program, during 1976, especially, we 
were becoming disillusioned with what we had. The Ohio system was rigid. 
We couldn't get out of it what we wanted, and we were going to SUR confer- 
ences in Denver and Atlanta and we heard about SUR II. It seemed like our 
type of system, because it was user controlled and it was very flexible. 
Our big hangup in Minnesota was that we didn't have dedicated computer 
staff, and, if we wanted anything done, we had to beg for it. It took a 
long time to get any changes made. So we were looking for a system that 
when the user wanted something done, it could get done, and we found this 
in SUR II. 

As Herb mentioned, it's a control file oriented system. Anything 
that comes out on a SUR report can be put into that control file, and we 
will get an output. This is all done in the SUR division; we don't have 
to rely on systems staff at all. I do all the coding for the control 
file; I go to the user and say, "What do you want? What would you like to 
see?" And I tell them if it's possible to get it out. 

We've done a test run on SUR II in June; we did a major run in 


November. We used all categories of service and all recipients, and we've 
really gotten our recipient caseload down to manageable levels. On our 
SUR II run, we had 128 recipients come out, out of 211,000 eligibles. 
So the control of volume is possible; you just have to know how to do it. 
By working with the system, working with frequency distributions, we've 
managed to overcome that problem. 

Now, as far as SUR as a management tool, we have recommended changes 
to front-end edits. We were involved with Project Integrity I, as I am 
sure everybody was, and it showed a major area problem in our system with 
surgeries, which we knew existed. As a result of that and some of the 
work we did, we were able to recommend some new front-end edits on surg- 
eries . 

We also use SUR as a check on policy, and do recent audits and 
computer runs, from leads like newspaper articles; our med-trans has come 
under fire, and we've recommended changes in the med-trans area. We also 
use SUR to monitor psych services . We have a maximum of 30 days stay in a 
psych hospital. So one of our items on our SUR reports is any stay over 
30 days, and we are able to monitor those hospitals, or those doctors who 
are ordering stays over 30 days. 

We also use SUR to monitor the provider file, and we found out that a 
lot of our physicians are on file without specialties. They weren't 
supposed to be enrolled this way, but somehow they got through. So we 
made recommendations back to the provider enrollment unit to get the file 
cleaned up; find out what the specialties really are; get the licenses to 
make sure they are on file. 

We have used SUR in support of other research that has been done. 
There is one study going on right now looking at utilization patterns of 
drugs in long-term care facilities, using SUR data to work on this. 

We've also used SUR to get data for Operation Crack-Down, because the 
Minneapolis-St . Paul area was chosen as one of the targets. We have used 
SUR data on a home health study that was being done, and we've also used 
it for dental studies. The data is there to use, and we figure why not 
use it. And we've had questions. Some people wanted to know what the 
utilization patterns of the AFDC children was as opposed to medical only 
children and we were able to give this data because that's how we had our 
class groups broken down. 

We've also taken a road show with our SUR. Our SUR division has gone 
on the road to different counties, let them know what SUR is about. In 
this way, we are enlightening them as to some of the problems in the 
recipient area. 

We do have a recipient-restriction program, wherein if a recipient is 
over utilizing, we can restrict them to one pharmacy and one physician to 
get their services. Restriction normally lasts a year. At the end of 


that time they are reviewed; and, if they seem to have come around, they 
will be taken off restriction, but they may be extended if things have 
not improved. 

We are getting more referrals from the counties because of this 
show-and-tell that we put on. We've also done show-and-tell with the 
provider groups. Tom Gay lord, who is the director, has taken the show to 
the pharmacy groups and the medical society, shown them reports that we 
can get off of SUR, and they are amazed at what we can collect on them. 
This may have some kind of a deterrent effect, the providers knowing that 
we are watching them, and we believe that they may have improved their 
practices just knowing that we are out there. 

We've also done a road show just for the claims processing division. 
You know, they see a lot of the stuff that's coming through, and its 
gotten to the point where they were getting frustrated because they could 
see problem areas cropping up. So we told them all, if you see an area, 
refer it to us. We have gotten some very good referrals from claims 
processing on patterns that they have seen developing. 

These are the major areas that we've found SUR to be useful for 
management. And besides the fraud and abuse areas, it has great potential 
in a lot of other areas. 

Thank you very much . 


MODERATOR: Richard Heim 


David Farrell, New Mexico 
James Healy, New Mexico 


MR. FARRELL: I would imagine that some of you find it a little bit 
unusual to see a PSRO presentation at an MMIS conference. 

I think it's probably quite unusual, but in New Mexico we feel quite 
comfortable and quite confident in talking about our role in Medicaid 
claims processing and review system here. We have a long history, first, 
being involved as a foundation for medical care and reviewing all Title 
XIX claims. Then moving on as a PSRO, and as, of course, time changed, 
our review system evolved and changed as well until we've arrived at the 
current configuration, where we think we've carved out an appropriate and 
helpful role for the State in providing a peer review component in their 
Medicaid claims processing system. 

Because we have such limited time, we've prepared some slides and 
hope that we can get across some of the notions and concepts using this 
approach . 

The presentation will be divided: first, three slides that are 
intended to give you some background to show how we're put together or 
structured in New Mexico. Then moving on, very briefly, to talk about the 
role we play in the review of the claims in the Title XIX system, and then 
moving into what we're really excited about. A new approach that we've 
developed here under the Health Standards and Quality Bureau Demonstration 
Project. And, by the way, that is now funded as an operational review 
program, because it goes beyond just being ambulatory. 

What we'll be doing is talking about what we've called problem 
review. And, again, this was developed with Health Standards and Quality 
Bureau funding, and we think it's an exciting new technique. 

The first slide is an attempt to show you what the PSRO program in 
New Mexico is comprised of. 

Generally, in most States, we find a PSRO program confined to what we 
call acute care review. That's the in-hospital review component of a PSRO 
program and we do pretty much the standard kinds of things that are 
expected of a PSRO. 

Over on the right, we have long-term care review; and, on February 
1st of this year, NMPSRO is scheduled to assume review responsibility for 
long-term care review under Title XI. This doesn't mean that we haven't 
been involved in long-term care review, because we've been doing it since 
1971, first as a foundation and then as a PSRO, under an agreement with 
the State Title XIX agency. 

The discussion today will focus on what we've called ambulatory 
review, here in the middle, and we call these our traditional review kinds 
of activities. We'll be discussing them in more depth later on — and 
then problem review, which kind of stands by itself as a Federally funded 



The second slide simply lists what we've called the Medicaid manage- 
ment system or any other good claims processing system; the major func- 
tions that we as a PSRO recognize and, in doing problem review, attempt to 
influence. We could go into a discussion of each one of those; but, in 
the interest of time, I think I'll go on to the next slide. 

This slide is a representation of the way in which New Mexico has put 
its Title XIX program together. Obviously, the Title XIX State agency is 
responsible for all activities, but has chosen to retain direct responsi- 
bility for program management kinds of functions, program policy deter- 
minations, establishment of benefit limits, and conduct utilization 
review; and, has contracted to the fiscal agent, EDS Federal, for carrying 
out the traditional kinds of activities associated with an approved MMIS 

There is one major difference here in New Mexico in that EDS has 
assumed responsibility for maintenance of the eligibility files. The 
State has contracted out to the NMPSRO for, again what we'll call tradi- 
tional review activity, that's precertif ication of certain services, 
prepayment review of certain claims and some involvement in the retrospec- 
tive review of the SUR reports. Standing by itself, down here, not 
contracted for by the State, is the Federally funded activity of problem 

What we mean when we speak of traditional review, as I said earlier, 
is the helpful role that NMPSRO has established in the Title XIX review 
system in New Mexico. Essentially, what we do is we run for the State a 
program of precertif ication. Certain elective procedures and certain 
types of services require that the NMPSRO deem that service medically 
necessary prior to the time the service is delivered. 

The important point is that if we say no, we say no before the 
service is rendered and, thereby, avoid a lot of very unhappy providers. 
In certain instances, a service is already rendered and may be subject to 
prepayment review, depending on whether we've identified it as a service 
or even identified a provider whose claims need prepayment review. 

Again, what we are involved in reviewing, in this case, is a claim 
for the service and are required to make a decision as to whether that 
service is medically necessary or not. Both of these programs introduce 
the notion of professional review with peers, peers being physicians or 
providers in the particular specialty that's being reviewed. 

The retrospective portion of our traditional review activity involves 
the NMPSRO use of the SUR reports, and, we do share a report set with the 
State, by the way, in an attempt for us to determine whether a procedure, 
provider, diagnosis, and procedure combination should be subjected to 
review prior to payment. This is the mechanism that we'll be using to 


determine who or what services get placed on prepayment review. 

Now, what we really came to talk to you about today is problem 
review. And essentially what we've done is utilized or established a 
process by which the NMPSRO can address problems. Problems stand to have 
a broad definition in our system. 

Item 1, problem generation and selection — just as an aside you may 
find that if you look at this very closely this is kind of an abbreviated 
version of a medical care evaluation study in PRSO terminology or a 
medical audit, if some of you are familiar with the quality components of 
a hospital review. 

But, Step 1, problem generation and selection in the problem review 
process starts from a different perspective. Instead of waiting for a 
quarterly report in a predetermined format to arrive, requiring analysis 
and an attempt to find some kind of anomaly in the data and then calling 
it a problem and then waiting to try to find a way to research that; we 
start with a notion that because of our involvement in review over time 
and the reports that are available, SUR, hospital profiles and so forth, 
that we're aware of a lot of problems. We use these other sources, but we 
are aware of a lot of problems. 

What we do is generate these, and our problem hasn't been finding 
them; it's been really prioritizing them. The selection process that's 
mentioned requires that we prioritize them and get them down to a meaning- 
ful number so that we can work with the resources that we have to solve 

Step 2, problem definition and research, is just that. Our effort in 
Step 2 is to verify, first of all, that a problem does exist, then to 
define it down to a point where we think we can do something about it, 
research the problem and perform analysis on it. 

All of this activiity in 1 and 2 leads to what we call corrective 
action and we think we've put together a good array of the kinds of 
corrective actions that PSROs are interested in taking. Then, of course, 
any process involving working on a problem and then taking corrective 
action calls for us to evaluate and restudy to determine whether or not 
we've had any impact on the problem. 

Step 2 in our system is so important that we put an extra chart up, 
just for a moment so you can see how we do this. How we do it is very 
important and goes back to the words that I was hearing in the earlier 
discussion, flexibility. 

What do you do when you think you've got a problem? As I said 
earlier, you verify, define, research and analyze. But if you are going 
to rely on some sort of predetermined information and you're involved in 
variable problems, broad ranging problems, you really can't get the job 


The MMIS report sets certainly provides good information and so does 
the PSRO hospital data set, but both are limited. Our MMIS report set has 
to be established in advance and arrives periodically. The PSRO hospital 
data set is confined to hospitals and isn't as flexible as we would like 
it to be at the moment . 

So, in order to support this portion of our review system, problem 
review, we developed what we call RGAR, a Report Generator for Ambulatory 

Quite simply, what we've done is taken MMIS data into the system, by 
arranging for a tape transfer. We sort through it, rearrange it, make it 
more readily accessible and then, through a program that is controlled by 
staff of the NMPSRO, we provide flexible and timely access to it. We set 
the report limits that we want, the report format that we want, and we 
have turnaround time that's been less than a week, most cases. 

Another way of taking a look at what we've done and another way of 
looking at how we avoided all the problems of getting involved in the MMIS 
process, is to state fairly what we did. We performed problem review 
without disturbing the process. 

Basically, as I said, we take the information that's already avail- 
able in the MMIS data base; we transfer it with a paid claims tape. We 
then select from the available data, repack that data, subject it to the 
process that I have already discussed. In step 3, we make recommendations 
that have the potential for impacting on all of the MMIS responsibilities, 
including the management responsibilities for policy and program, all the 
way down to the level of where we may be able to impact on some specific 
aspects of the claims processing and screening portion of the program, or 
in some ways on the way we perform our own review. 

Now, we like to think that we've created a new kind of a system for 
doing review. The first thing that we did, under the demonstration 
project, was to create a management structure for managing this process. 
Therefore, we naturally went to something called the management committee. 
Then we placed the management committee in charge of running the process. 
Another way of looking at it as a system is that we made available to 
them all of the input sources that we talked about earlier. 

In their problem generation and selection phase, they have available 
any of the analyses that have been made of SUR reports, in order to 
generate the problems, anything that came out of hospital profile analy- 
sis, any impressions, concerns that have come out of physicians or staff 
prepayment review experience, anything we've seen in MCEs, the study 
results, and any kind of outside referrals. All of these can be consid- 
ered for action. 

Moving to phase 2 we then have identified what the information 
sources are that will allow us to work on this. The heart of the system, 


again, is the flexible report generator, RGAR; SUR reports are available 
as well as hospital profiles. 

I said earlier that we had assembled an array of potential activi- 
ties. Now, we heard a lot about fraud and abuse this morning. I think 
that you have to remember that a PSRO approach is a little different. Our 
notion is that a lot of these problems require education and that we can 
clean up a lot of the activity that is going on out there through educa- 
tional feedback. 

One of our mechanisms, therefore, is educational feedback, and it 
takes place in two modes. One-on-one could involve a letter, phone call, 
or even a personal office visit in an attempt to correct a quality kind of 
a problem. If we find a problem exists that's of a more general nature, 
we can often take the route of publishing the study that we did and the 
results that we achieved — or the results of our analysis — in a news- 
letter or in perhaps a scientific publication, if the study was done well 
enough . 

We can then, if we find a different kind of a problem, place either 
the provider that's involved in the problem or the procedure or procedure 
diagnosis on prepayment review, and thus have moved that particular 
problem over to be addressed by our traditional review system. 

We've developed a situation where, if we find problems of a certain 
nature, we might make recommendations to the State Title XIX agency about 
some of its policies that might be modified. We might make recommenda- 
tions about review system modifications. 

Having taken all of these actions, if we are really not able in our 
own minds to reconcile that we've achieved any kind of a change — and the 
way we identify that is again through step 4, evaluation and restudy, if 
we feel we haven't been able to promote the kind of change that we think 
is necessary, we can always take the action of referring the recipient or 
the provider outside of NMPSRO to the Board of Medical Examiners or to the 
State Title XIX agency, where a different kind of process will begin. 

Now all of this activity would lead to nothing had we not had some 
results to report. As a result of our activity as a demonstration pro- 
ject, we were able to convince the Department of Health, Education and 
Welfare's Health Standards and Quality Bureau that we should be continued 
as an operational system. So we've evolved from the demonstration project 
phase into an operational phase and are continuing this kind of review. 


MR. HEALY: I'm the second and somewhat lighter half of the Dave and 
Jim show, and I really get the fun part of this presentation because I 
get to talk about the results of our demonstration project. 

We began our demonstration project in October of 1976, and, really, 
the first year of the project was devoted to development of the Report 
Generator for Ambulatory Review and of a system for utilizing physicians 
and staff in a management role to select and define problems. 

Once we began our second year of the demonstration project, we really 
went into an operational mode. We were able to generate over a hundred 
and forty potential topics for study, medical problems, utilization 
problems, potential abuse, things like that. 

What we found was that our physicians were interested in performing 

studies of medical quality. They really wanted to try in a nonpunitive, 

non-sanctioning way to modify physician behavior when they found it to be 
a problem. 

So they selected four drug problems. They selected steroids given to 
children with upper respiratory infections. They selected the use of the 
chloramphenicol as a potentially very dangerous drug in an outpatient 
setting since it can cause fatal aplastic anemia. They selected the use 
of tetracycline as an ineffective drug for upper respiratory infections; 
and, finally, they wanted to study the use of drugs given to pregnant 
women . 

Finally, we selected two studies, tetracycline for URI and the use of 
chloramphenicol as having the best potential for physician behavior 
change. Also in the project, after narrowing our topics down to that 
level in the first half, we think we did change physician behavior in New 
Mexico. We also did a study of emergency room utilization, which we found 
very interesting and finally did a study of tonsillectomy in New Mexico. 

First of all, in the fall of 1977, after we had gone through our 
developmental phase and were into an operational mode, we identified some 
33 physicians who were found to be prescribing tetracycline for upper 
respiratory infection in the highest numbers. 

We found that by contacting half of that group we could have the 
greatest impact on quality of care in this problem. We could also retain 
half of that group as a control group to see if they changed as well, and 
if there was anything else going on in New Mexico that might be respons- 
ible for the behavior change. 

We had 17 physicians randomly stratified into our experimental group; 
and we found, in a six month period, after personal visits by our physi- 
cians to their offices, conducted in as much of a non-threatening way as 
possible, that nine of the physicians stopped prescribing tetracycline for 
URI at least to their Medicaid patients. 


Only one physician in the control group stopped the prescribing in 
this manner. We formed a chi-square on this and found a level of signifi- 
cance at the .025 level. 

We'd also performed an emergency reut ilization study which our 
physicians really found to be fascinating. We identified the patients in 
New Mexico who had gone to the emergency rooms more than seven times in 
one year. We found a hundred such patients. 

We also got a random sample of the Medicaid population who had not 
gone to the emergency room more than seven times. We found the average 
age of the patients of the high utilization group to be 33 against the 24 
in the random sample . 

This began to suggest to our physicians that, especially in an AFDC 
population, it was a little unusual to have such a high age and such high 
utilization. This group accounted for $34,364 in the emergency room alone 
in one year against $1,700 for the random sample. 

Amazingly enough, for their cost per visit, the high group was only 
$28 while the low group accounted for $37 per visit. Again, our physi- 
cians attributed this to the fact that the high utilizers were perhaps 
abusers and were well known to the emergency room staffs. 

The total cost of care to the Medicaid program in New Mexico for the 
high utilization group was $340,000 in one year for a hundred patients, 
while the random sample accounted for $41,000. This works out to $3,398 
in cost per patient and $400 per patient for the random sample. 

Our physicians found this to be so interesting that they decided to 
actually do a review of profiles of the high utilizers. In so doing, we 
had three reviewers independently look at a sample of the hundred pa- 
tients, and they found that about 98 percent of the time, they felt from 
the data, that the patients were abusing the emergency room. 

As a result of this, we've opened talks with the State agency and 
have made some recommendations concerning program policy change which 
might control this group. 

Finally, we did a study of tonsillectomy in New Mexico Medicaid. We 
identified 150 patients who'd received a tonsillectomy in six months in 
1977; ninety of those were eligible for one year prior to their surgery. 
Our physicians wanted to identify that one-year period because they wanted 
to look at episodes of illness. 

They adopted criteria that said a patient had to have four episodes 
of tonsillary illness prior to having a tonsillectomy or had to have an 
episode of paratonsillar abscess or neoplasm. We found that 51 percent of 
the patients actually met that criteria. 


Since there are between five and six hundred tonsillectomies per year 
in New Mexico Medicaid, at an average cost of $559, our physicians felt 
that some PSRO policy change could perhaps help to control this situation. 

In completing our demonstration project and going into an operational 
mode, we decided to sit back and kind of try to see what came together 
that allowed us to have the success that we did in New Mexico and to 
develop a problem review system that we found to be so effective. 

We right away knew that the broad elements that were needed were 
cooperation between the involved organizations. We have a long history in 
New Mexico of successful cooperation with the Title XIX State agency, the 
PSRO and the fiscal agent. We also needed data and looking at our MMIS 
data base we found a rich source of information. All we needed then, we 
realized, was the seed money to get going and this was provided to us by 
the Health Standards and Quality Bureau in the fall of 1976. 

Some of the more specific things that we needed? We had to have the 
interest of physicians and this really was a key. In New Mexico again, we 
had the experienced physicians to really provide us with that kind of 
support. We needed core staff support. We performed the two-year demon- 
stration project and all the studies that I've talked about with three 
full-time equivalents over two years. 

Finally, we needed immediate and flexible access to the data base. 
When I say immediate, we really are getting immediate access to the data 
base. We're not getting any kind of standard reporting system. When we 
want to get something, we write the program, decide how much computer time 
it's going to use and then access the data; turnaround time is about one 

It is important to note here that we don't have a routine report 
generating activity going on. We only pay for computer time when we 
actually want it. 

What are some of the things that you don't need in order to do this? 
Standing outside the claims flow, the claims processing, and the claims 
review activity as we do, we find that you don't need changes in regula- 
tions . 

We don't need waivers in requirements for claims payment time, for 
example, in order to get our review done. We stand outside that system 
and look at it from a distance. You don't need collection of new data 
elements. In the MMIS in New Mexico, we found that we had to be selective 
about what we chose, as a matter of fact. You don't need a large staff, 
as I mentioned. 

Finally, you don't need an extensive physician consultant budget. We 
were able to use roughly half of the physician time we had budgeted, yet 
we found that physician time was being used efficiently and effectively by 


calling them in at specified points in the process and having staff 
support provide the real ongoing activity. 

What are the benefits? I've been touting the system. Let me talk 
about some of the broad ranging benefits of problem review. First of all 
as I said, we're outside the claims flow. We can stand back and decide 
what's a problem, take our time about it, select the problem that's most 
important to the PSRO, both to staff, to management and physicians, and 
also take our time in defining that problem. 

We can then take our time and think about what the best opportunity 
for change will be. Dave mentioned some of our opportunities for change, 
including systems change, program change, PSRO policy change, and change 
in providers prescribing habits, for example. 

Secondly, we're performing studies which are the basis for problem 
review, but it's important to note that we do them at the PSRO. We don't 
have an outside consultant coming in. We don't have a mandate from a 
higher authority telling us what we're going to study. We select it. Our 
physicians select it and our staff selects it. 

We've mentioned the ability to study a broad range of topics. 
Quality of care — of course, this is the big interest to our physicians. 
They want to know what's going on with prescribing drugs, for example, in 
the outpatient setting. 

We have an opportunity to study utilization both on a specific 
provider or recipient level or as an aggregate study. We can study 
systems problems. I failed to mention that in our emergency room study we 
found, in looking at diagnoses, that we were reviewing a lot of diagnoses 
in our prepayment system that were always paid for. We didn't ever deny 
payment for them because they were always emergencies — trauma, frac- 
tures, things like that. By eliminating those from review with an automa- 
ted edit, we have eliminated about one-third of our claims volume. 

Finally, we can make program policy changes. We can recommend 
changes to the State agency. Finally, I want to say that once the system 
is developed, and it did take us a year to develop both the review system 
and the data support system, it's self-limited in terms of cost and 
scope . 

Thank you very much . 


PACE: Utah's Approach To 
Physician Utilization 

Sharon Wasek 

Systems Coordinator 

Office of Health Care Financing 

Department of Social Services 

Salt Lake City, Utah 

James Cannon 
Assistant Executive Director 
Utah PSRO 
Salt Lake City, Utah 


MS. WASEK: Good afternoon. The purpose of my presentation today 
is to present the current as well as the potential use of the computerized 
system that we in Utah call PACE. 

PACE has been used, historically, since 1975, for monitoring quality 
assurance of physician ambulatory care services. Even though PACE has 
been used extensively for this purposes, we are finding more approaches in 
other program management for its use. 

We see PACE as a tool for both Medicaid program administration as 
well as PSRO. I hope to show you later on some of the examples of both 
applications . 

As was stated, PACE is an acronym for Physicians Ambulatory Care 
Evaluation subsystem of Utah's MMIS . PACE has, historically, supported a 
program for physician ambulatory care services by the Utah PSRO. They 
have had primary responsibility for monitoring physician services under 
the Medicaid program in Utah. 

Since UPSRO has been charged with exercising medical judgment and 
specifying peer review standards, the PACE system has proved to be an 
effective tool by providing a flexible means of communicating professional 
review guidelines to the computer system, which includes the ability to 
easily add or to change or to modify any existing guidelines. A guideline 
is somewhat similar to a SUR report and matrix combination, where the PSRO 
or the State can input logical sentences of review, and also have the 
ability to perform prepayment as well as post-payment review on Medicaid 
claims data. 

After a year of operating in a prepayment mode, we selected to go to 
post-payment, as we felt that the review was just as effective and it 
avoided an inherent two-week delay in claims processing. 

An additional capability in PACE is that of constructing patient 
treatment profiles, so that quality of care and utilization patterns could 
be observed over a period of time and evaluated in retrospect. 

In addition, PACE has the capability of providing special evaluation 
reports or treatment profiles from the PACE history file to further 
support quality assurance monitoring. Examples of these would be the 
Medical Care Evaluation Studies, treatment practices for a particular 
diagnosis, or for a particular provider or client. 

Perhaps an effective method for me to explain the approach that PACE 
uses is to compare PACE with SUR and/or SUR II, since many of you are 
somewhat familiar with the operating techniques of a SUR type claims 
monitoring. I am aware of the potential danger is doing this, in making 
this type of a comparison in a simplified form, but I think that it is 
probably the most effective way to explain to you how PACE works, since a 
lot of the discussion has already taken place on SUR and probably more to 


come. We have felt that this differentiation between PACE and SUR is 
essential to avoid within our department any overlap or any duplication in 
review between SUR and PACE. 

We're also involved in pursuing a PACE/SUR demonstration project with 
our Utah PSRO. We hope to identify or further evaluate any overlap or 
duplication of effort between the two systems. 

We've been able to identify some user constraints that we've in- 
stalled in selecting only proper types of guidelines out of PACE, as 
compared to what SUR could do more efficiently. And as I show a couple of 
examples later on, I'll try to bring that out. 

We see PACE and SUR as two completely different systems, each with 
their own unique potential and capability of use. PACE, in our opinion, 
is a more client-oriented quality of care system with application for 
program policy monitoring of restricted services, such as client abuse 
detection, provider claim billing practices, or any other quality of care 
question. SUR to us is a tool for assessing patient abuse of services 
or potential fraud activity. 

Again, PACE is a client-oriented system which employs automated 
screening guidelines. However, the PACE guidelines are presented in a 
format that is more clinically oriented rather than a statistical compar- 

This transparency represents an over-simplification of the PACE 
processing. I do have available some more detailed specifications of the 
data flow through the PACE system if any of you would be interested, but I 
thought this pretty much explained the process of the PACE system. 

It is operated by the State, along with our MMIS system. PACE we 
operate on a bi-weekly basis. Claims processing writes warrants once a 
week. When we run PACE, we take the new claim data from MMIS, all of the 
guidelines that were developed, any specific study topics that were 
requested by the State Medicaid agency or PSRO and the PACE history file. 
They're combined and two separate processing cycles go on within that 

I might say that PACE in Utah is working on limited data base, in 
that we have restricted the review process primarily to physician, hospi- 
tal and pharmacy claim data. The screening would be performed for the 
guideline creation or for any special data requests; the outputs provided 
to the physician review in the form of management summaries. 

I would like now to explain some of the differences, as we see it, 
between PACE and SUR. In PACE, all exceptions are based on user-defined 
criteria. In other words, it's a peer expectation of a certain delivery 
of service. In SUR, however, exceptions can be produced from user defined 
limits or from a claims deviation from a statistical norm. 


PACE is not geared toward statistical comparison of services. In 
PACE the exception criteria can be defined over a period of time. The 
system has the ability to delay the screening of a potential exception for 
a specific time, until the guideline has been satisfied, with each guide- 
line having the capability of its own unique time criteria. 

In SUR, all exceptions are produced immediately, based upon the claim 
data available in the SUR history file. SUR, unlike PACE, does not have 
the ability to examine individual claims within a definitive time period. 

In SUR, the exceptions are oriented more towards the total population 
of clients and providers with exceptions generated usually on much broader 
or less specific data. 

PACE will review for the lack of an expected service. For example, 
if the State wanted to monitor for assistant surgeon charges without 
surgeon fees on the data base, PACE would generate an exception for each 
of these occurrences in whatever time frame was appropriate for your claim 
filing; SUR exception processing, whereas, is dependent upon actual claim 
occurrences . 

PACE has the capability of also linking data from multiple claims 
type. In other words, it can link an ambulance service for a particular 
client with a medical service, or a physician treatment with a hospital 
claim, insuring that the hospital claim charges matched what the physician 
billed for. SUR, however, is dependent upon the data on a single claim 
form for exception processing. No interlinking of data from multiple 
claims is performed. 

In PACE, the history file is accessed only for patients with new 
claims which are found to be subject to the screening. In SUR, the entire 
population of client to providers are referenced by exception criteria, 
and they are accessed in order to produce a statistical base in the user 
specified time frame. 

PACE can only produce a very narrow statistical comparison upon 
request for a particular subject. It will not produce or provide poten- 
tial guideline data to the user. SUR is much more capable to develop 
efficient statistical analysis of provider and client activity in multiple 
user defined report areas. 

PACE maintains a history — we find this is one of the unique bene- 
fits of PACE — of every review activity performed on any particular 
client or provider in the period of our total PACE history since 1975. We 
find it very beneficial to know the history of a particular client or 
provider in the review mechanism. 

SUR does not. Each SUR processing cycle is totally independent of 
past processing. All elements are recalculated at each run, and exception 
tracking is done on a manual basis externa] to SUR. It is our impression 


that PACE is easier to manage in terms of volume of output than SUR, 
because a lot of the review is done on the front end by setting the type 
of guidelines, so when a guideline is accepted, the review has already 
been performed. 

PACE is limited only to the data elements keyed into the MMIS system 
and the size of the reference file. The volume or the numbers of guide- 
line sets available for review are not limited. SUR is limited to what is 
in the matrix. SUR, too, appears to have much more flexibility in that, 
but it also is limited to 200 matrix items in provider, 200 in client, and 
200 in treatment analysis. 

Client claims detail in PACE is decoded, it is organized by episode, 
and presented in a fashion similar to what you would expect in a medical 
record. The PACE patient treatment profile is readily interpretable for 
review or analysis. SUR claim detail reports or summarized detail on 
individual clients are organized by category of service and are in coded 
form. SUR, too, decodes certain key elements, but still retains its 
segregation by class groups. 

Because PACE was developed by a physician review group, the system 
supports a review that is more analogous to a regular physician audit than 
does SUR. And to the extent that the Medicaid program administration is 
interested in quality assurance of the delivery of services rendered the 
Medicaid recipient, PACE is an invaluable tool. To the extent that the 
Medicaid program administration is interested in supporting an audit 
function, SUR may be of more value. 

We have found with PACE an important vehicle for monitoring quality 
assurance, as well as abuse detection. From our experience we have found 
that in order to assess the potential of an abuse situation, it is much 
easier for the reviewer to analyze the pattern of care rendered an indi- 
vidual client as to what would be compared normal for that delivery of 
service. For example, if a patient on your history had two deliveries 
within a six-month period of time, it would be pretty evident that there 
is some definitive program action that is warranted. 

If, however, knowing that a particular provider has exceeded his 
peers in the number of deliveries performed in a reporting period, still 
leaves additional analysis that is needed and possibly an on-site audit to 
determine if there is any adverse action. 

One criticism that I have heard regarding this type of review is that 
PACE is too specific-oriented or limited in that it does not assess the 
universe of activity going on within the Medicaid client data base, and is 
solely dependent upon client capable guideline creation. 

It should be observed, I think, that SUR, too, is highly dependent 
upon the care with which matrix elements are chosen. In our opinion, both 
systems require a high level of user competency and intuitiveness to 


maximize the features of either. 

However, we are intrigued with the possibilities of combining the 
best concepts of both, and this is the thrust of our current activity with 
the Utah PSRO. We hope to report to you at a future time to advise you of 
our results. 

I would like now to go into some specific aspects of the use of the 
PACE guidelines in State program management. 

This transparency shows to us one of the very unique features of 
PACE, the patient treatment profile. Maybe we can go through the circled 
letters. Up in the upper right-hand corner, A is the client identifying 
information. It identifies the client, the sex, the age, the client ID 
number. In B, we have the data service arrayed in data service order. C 
identifies the provider specialty providing the service, as well as his 
provider ID number. D describes the description of the diagnosis on the 
claim form; E, the diagnosis code. F is the diagnosis reference code that 
comes off our claim data, referencing the service that was provided to the 
diagnosis code. 

Let me take the top example — congestive heart failure in A. The 
office visit was provided primarily to support congestive heart failure, 
rather than the heart rhythm disorder. We find this is very valuable in 
that it arrays the services in order. It can be easily looked at. You 
will note on the bottom, in J, it identifies the guideline that was not 
met and the past history of this particular client. 

Number 1, the client was reviewed in March of '76 for the use of 
propranolol with the history of congestive heart failure. It was reviewed 
by Reviewer 24, and there was an educational letter sent out to that 
provider at the time. Currently, the guideline that has not been met was 
that the client was provided two EKGs within a six-month period for a 
heart disease, diagnosis code ranges that we have inserted and assigned 
the number 0292. Like SUR, we have the capability of assigning one or 
multiple diagnosis to a group. 

This is an example of the format of a PACE guideline set. It is 
different than the format in the SUR system. It is easier for us to 
understand. We assign a guideline number to it. We are asking the system 
to flag or identify any separate claims for Procedure Code Listing 084, 
and Procedure Code Listing 084 is our prenatal care, postpartum care, 
urinalysis, hematocrit, hemoglobins, office calls, office visits, unspeci- 
fied office visits. 

In other words, we are asking the system to tell us wherever we get 
separate bills for claims with those procedure codes, when a claim has 
been encountered for total OB care. We are asking the system to go back 
into history and identify an occurrence of a provider billing us a total 
global fee concept and billing us independently. This has been very 


valuable. We have identified several occurrences, and this is an item 
that our claims processing system is not able to detect. In a global fee, 
the provider is required to bill us one fee for a total service. 

Through PACE, we are able to identify inappropriate billing, and on 
this particular guideline, I believe a couple of years ago it led to the 
suspension from the Medicaid program of one particular provider who failed 
to change his practice. 

We have identified some examples of PACE guidelines and how we find 
them useful in State program management. Jamie will go later into some of 
the guidelines that PSRO uses in quality of care, but PACE, to us, is a 
dual system. It serves both needs. 

As we just discussed, PACE is valuable to us in recognizing double 
billing. We can screen for services, even multiple deliveries, where we 
have had providers bill us on different dates of service for the same 

One of the more frequent we have identified is in the area of newborn 
care, providers billing us either on the day the baby was born or on the 
day the baby was discharged. Again, that is not something that claims 
processing can pick up, but that we do screen for through PACE. 

Another area where PACE guidelines have been helpful to us is in the 
area of client misutilization. By developing appropriate guidelines as to 
the number of expected controlled substances or the number of expected 
drugs, we identify clients who are misutilizing services or potentially 
going from one physician to another physician, or pharmacy hopping. 

A third area is one where we can look for misutilization by provid- 
ers; the top one is where a PSRO has identified some physicians in the 
State of Utah who were abusing antibiotics for treatment of viral disord- 
ers. Because they have failed to modify their practice by letter, we have 
a guideline where a PSRO then refers to us any claims paid for this 
provider for that procedure, and we credit out the payment. 

An interesting one when the new abortion regulations went into effect 
and we closed down payment for abortions, we found that one particular 
provider, who previously had been high in performing abortions, suddenly 
had an increase in the number of office calls that were being performed on 
women within a month. 

Since we did not have policy guidelines to prevent payment to that 
provider, we asked the PSRO to screen for us the appropriateness of the 
frequency of those office visits. For many we have gone back and retrac- 
ted from payment because they have not been deemed appropriate by the 
PSRO. Another area is for monitoring outmoded or unproven procedures. We 
have identified a procedure list of surgical procedures that are clinical- 
ly no longer considered appropriate care. We screen, then, for any 


of those occurrences. 

Another aspect of PACE guidelines that has been valuable is in the 
area of client abuse. We have developed a guideline where we screen for 
multiple injuries to children under the age of one. Many times this is 
not identified by a particular provider, or the physician provider is 
hesitant to refer those to the proper authorities. 

Now, in several instances, the Family Services Department in Utah has 
identified client abuse situations and has been able to remove the child 
from the home . 


MR. CANNON: I have had an opportunity to present on a couple of 
previous occasions at IMM conferences, and some of you are familiar with a 
number of the things that we have talked about. 

One way to talk about the PACE program is to talk about the gim- 
mickry. This system that we have been involved in developing, that 
Optimum Systems, Incorporated, worked with us on, is a very interest- 
ing kind of a thing. 

From the standpoint of a physician review process, it certainly has 
proven effective. We could spend quite a bit of time talking about that 
aspect of it, and we would personally find it interesting to do so, "and 
perhaps you would get pretty fatigued in a short time. 

But I think that one other thing we ought to say is another aspect of 
the program that is important. In fact, this has been implied throughout 
Sharon's presentation. This is the fact that the program works, not 
simply that the data system works and not simply that the data system 
produces information that means what it says it means, but that, in fact, 
the information is useful in terms of a review effort both on the physi- 
cian side, the PSRO kind of activity, but also in support of State objec- 
tives . 

I think that is important. One more thing about the gimmickry aspect 
of it, that may be helpful to you for those who have heard the presenta- 
tion in the past about sort of the basic screening process that Sharon 
spent some time describing. 

That is: the PACE system turns out to be useful for the State, not 
only because it can do a routine kind of screening, triggered by new 
claims, either an immediate sort of screening on data already in the 
history data base, but also, as mentioned, it provides a delayed screening 
process, looking for services that at the time the triggering element is 
observed, haven't yet been billed to the program. 

In addition to that, the PACE system can select patient populations 
with specific characteristics for manual review. We define a data range 
and then we say one of the following: we want these specifically identi- 
fied patients, we want patients of a specific provider or specialty , or 
we want patients with claims matching specified parameters, diagnoses, 
procedures, drugs, age and sex. 

A third area is that the system does allow comparisons with other 
individuals or with a specialty, provider comparisons based on exception 
rates. And, then, fourthly, the PACE system allows utilization compari- 
sons, either a specific provider to a specialty, the specialty's special- 
ty, or among services, either in terms of raw frequencies of those serv- 
ices or drugs, or per patient counts; noting, for example, the median use 
per patient, or the 90th percentile use in an individual's practice. 


It becomes difficult, and as I sat here listening, I was aware that 
if I were you, I think I probably wouldn't perceive entirely some of the 
nuances of the distinctions between the sort of thing that SUR does and 
the sort of thing that PACE does . 

I won't try to belabor that anymore. You start with a patient and 
characterize the provider's practice based on what he does on a per 
patient basis is really at the heart of the PACE system, and derives from 
the fact that PACE was designed by a physician group concerned about 
patient care. 

That gets me into the philosophical point I want to make. It's 
really the essential mission of the Medicaid program to assure that the 
patients, who are eligible for Medicaid program benefits, get the kinds of 
services they ought to be getting, and that, in addition we are not 
wasting our money, spending it on services that aren't relevant to the 
patient's situation. 

In order to understand if the patient is getting what he ought to be 
getting, we have got to know what he is getting, and that ends up some- 
times being a problem. When you are dealing with a large number of 
patients, a system is needed that actually characterizes patient care in a 
way that gets down to the ones where the patient care looks unusual, and, 
if the issue is one that potentially is a provider pattern, it is present- 
ed in a way that you can understand what the provider is doing. 

So, the first point is, then, that in terms of your interest in PACE, 
the reason why it even ought to be talked about, is that for Medicaid 
program management, PACE does have some useful techniques that we recom- 
mend to you. 

I think the second thing that makes it interesting is that it has 
been shown to work. We have a lot of experience now in Utah. 

We have dealt with numerous physicians in the State. Our contacts 
have been associated with behavior change that we feel is substantial. 

Let's deal first with the level of activity. You can see here the 
numbers beginning October '76, and going to June of last year; there have 
been approximately 3,000 cases studied on a whole variety of topics. Out 
of those evaluations, 1,172 letters have been sent. 

There is a phenomenon occurring here that I will just take the time 
to observe. Through the end of '77, the ratio of letters to cases re- 
viewed was in the neighborhood of one in four. By June of '78, the ratio 
of letters to cases reviewed was in the range of two to five, going from 
26 out of 100 to 38 or 39 out of 100; the point being that as we learn, we 
are getting even more selective in terms of the cases we look at, and, in 
fact, are dealing more effectively with those, or at least are finding 
that the ones we look at are the ones we also want to contact physicians 
about . 


A total of 575 different Medicaid providers have been contacted 
through those 1,170 letters. This represents us pushing — since most of 
those are physicians — half of the physicians that we have on the Medi- 
caid rolls in Utah. The subjects involved totaled about 69. That counts 
as one subject — all the patients we wrote about, who appeared to be 
misutilizing services, and about whom we notified the providers. 

I think the other thing I should say is in terms of the actual effect 
of this effort. These contacts seem to produce a response. This may be 
evident on the next slide. 

This was really quite surprising to us. The data have been reported 
elsewhere, and you may have run into them. Looking at a study of 100 
physicians contacted during 1976, we found that 84 percent of them modi- 
fied their behavior substantially on the specific topic of the contact. 
There were only the remaining 16 percent who didn't respond in any kind of 
significant way to the first contact. Those were followed up, and of 
those seven-eighths, 14 of 16 responded to the second communication. By 
the time we began denying payment, we produced a result in all of them. 

It is interesting to note that on specific topics, just a few topics 
out of the large number that are dealt with, a result occurs. I think, 
finally, the other point would be that there is a real benefit in estab- 
lishing a relationship with the physician community where they are in- 
volved directly. 

New Mexico's presentation is very interesting in that regard, and 
there have certainly been some other things described that are very 
important in terms of how to involve the providers in the review effort. 
Certainly, that has been a strong point in our experience, that the PACE 
activity and the relationship to other aspects of the State's utilization 
control responsibility has not always been simple in Utah. 

We are viewed by outsiders as having a very amicable sort of re- 
lationship, and sometimes we wonder how we are getting along as we deal 
on a day-to-day basis. But we find we have been able to work out problems 
and, although I am on the other side of the fence, I think it is fair to 
say that the Medicaid program in Utah has benefited greatly by the in- 
volvement of the medical profession in the activities, specifically in 
taking some of the heat off the Medicaid agency by handling a lot of this 
review responsibility and by dealing directly with the physician providers 
in the State. 

There has been a certain amount of credibility that a Medicaid agency 
has trouble engendering with the profession, that a peer review organiza- 
tion sponsored by the medical profession can achieve. We find that 
accounts in part for that high rate of responsiveness to our contacts with 
the profession; that they have sensed that this is coming from a peer who 
understood, at least in some sense, their problems and was interested in 
what they were doing, and recognized that in almost every case the 


physician was motivated by good intentions. To the extent that he was 
doing something that his peers didn't agree with, he recognized that his 
peers understood that, in medicine, there are 27 opinions for every 25 
physicians, and he recognized that a dialogue could occur without immedi- 
ate threat of sanction of some other sort. 

So, our experience has been that this approach has proven useful and 
has proven a very interesting kind of process. We are grateful that 
we have been able to learn some things in the past few months as we 
have made a closer kind of study of the utility of PACE for the State 
system and in its relationship to SUR, that there are ways in which 
we can reduce some of the operating costs of running this kind of a 
sophisticated thing, and as well, that we have been able to identify 
some ways in which we really do see the potential of combining concepts 
from both systems. 

We are excited about those possibilities and excited about learning 
from some of you your own experiences, that we may be able to implement 
here and share with you as we go on. 


Data and Information Necessary 
for Management Control of 
Fraud, Abuse, and Waste 

Bruce Ferguson, Chief 

Office of Budget Services 

Department of Social and Health Services 

Olympia, Washington 

John Kasonic, President 

Kasonic and Associates 

Seattle, Washington 


MR. FERGUSON: Two points before I really get into this: first of 
all, we recognize we are playing into the cocktail hour. So, we assure 
you we won't drag on too long. 

Secondly, neither John nor myself are really Medicaid program ex- 
perts. As Dick indicated, I am a budget officer from the State of Wash- 
ington in the Department of Social and Health Services which, among other 
things, administers the Medicaid program. 

Really, my principal involvement with the Medicaid program per se has 
been as the director of business and finance at a county medical center, 
which is about a mile up the road, and is the principal teaching hospital 
for the University of New Mexico, and I believe was the principal deliver- 
er of Medicaid services, at least hospital care, in the State of New 
Mexico. So, again my perception of the Medicaid program or my experience 
is mostly on the provider side, and, of course, John's principal involve- 
ment has been as a consultant to providers. So, neither one of us are 
experts in the Medicaid system. 

In terms of the real thrust of our presentation, what we are really 
trying to address is the use of Medicaid management information at a 
policy level to keep the program from contributing to or forcing abusive 

The fundamental purpose is really threefold. Number one is to 
present a Medicaid management problem as perceived from the executive 
level of an umbrella agency. Secondly, it is to discuss the approach that 
we took to address this problem, and our observations of MMIS as a re- 
source for assisting us in our effort. Thirdly, it is to discuss our 
plans for bridging what we perceive to be a reporting gap in MMIS as it 
relates to the problem. I would also like to make the point that this 
study is in progress. So, if you miss the punch line, it is because we 
are not really finished. 

In terms of background, this effort started along about July, when I, 
as a newly arrived budget officer with a hospital finance background, was 
advising newly arrived top level management of an umbrella agency on the 
formation of a $2 billion budget for the ensuing biennium, and the budget 
spanned the totality of health and welfare programs, including health, 
welfare, child welfare, aging, voc rehab, developmental disabilities, 
mental health, adult corrections, juvenile rehab, and public health, 
among other things. In general, the objective was to produce a conserva- 
tive budget reflecting some thoughtful approaches to restricting the 
growth of social and health service spending, which I am sure most of you 
at the State level have been involved in. 

As we addressed the medical assistance program in this budget devel- 
opment process, two basic options surfaced in keeping with the idea of 
restricting growth. One had to do with continuing to finance the program, 
which obviously does not do too much to restrict growth. The other 


option was to reduce the scope of services and/or eligible groups. From 
our perspective, again, as newly arrived people, both options proved to be 

First of all, financing the problem was really not acceptable because 
of the implications for other departmental programs. The cost of financ- 
ing the continued growth of the medical assistance program was pretty 
substantial when viewed in terms of the impact on such programs as adult 
corrections, juvenile rehab, developmental disabilities, et cetera. 
It would have forced disproportionate and unacceptable cuts in these 
programs . 

In terms of reducing scope either in terms of people covered or 
programs provided or services provided, that was also unacceptable for 
several reasons. First of all, in looking at the scope of the Washington 
program — which is a pretty broad program in terms of services provided 
and people covered — we just felt intuitively that there were more 
options available for managing the program and limiting the growth than 
simply going in with a meat ax and reducing the number of people covered 
or reducing the number of services provided. 

So, we didn't really feel that there were enough good answers or 
enough good analysis to really support that as an option. Secondly, we 
felt that most of the scope reduction options, whether they were recip- 
ient-related or service-related, ignored some of the fundamental relation- 
ships existent with the health care system. 

For example, the idea of co-payment on primary physician visits came 
up. We didn't really feel that was too well thought out in terms of what 
the impact down the line might be, for example, the impact on emergency 
room visits. Another example would be restricting the scope of eligible 
people. Well, that is an easy approach to take when you are serving a 
number of optional groups. On the other hand, if you limit the coverage 
through Medicaid, you are simply contributing to the discounts and allow- 
ances, or revenue discounts that a hospital has to absorb. That gets 
passed back to private patients and really back to cost reimbursers 
through the redistribution of those costs, and . that didn't really appear 
to be a very prudent public position to take in either respect. 

So, we didn't really feel that any of the scope reduction options 
that were presented were legitimate. Our response was really to adopt 
sort of an interim step in order to prepare and present a budget, but more 
importantly, to launch a fairly broad study with the objective of trying 
to surface ways of influencing the medical care system without exercising 
arbitrary controls. 

The study really had three major components. The first was the 
identification of short-term operational improvements, and this had to do 
with upgrading the surveillance utilization review activities, upgrading 
the activities of our medical consultants, which are really a pre-PSRO 


type admission review. 

The second area was the identification of long term policy options 
for restructuring the program, which really centered around approaches to: 
(a) reducing demand; and (b) adopting a more prudent buyer approach in 
terms of procuring services. 

And, thirdly, and most germane to this meeting, is the development of 
a set of executive level reports designed to provide a comprehensive but 
digestible overview of the program on a recurring basis. 

It was really in the second and mostly in the third of these compo- 
nents that we really came into contact with MMIS. In terms of our observa- 
tions of MMIS as a resource for developing this set of executive level 
reports, our intent going into the project was probably somewhat naive, 
but we felt, given an overview of MMIS, that we could simply reach in and 
extract a set of information, and simply translate those into a more 
cosmetically appealing set of reports that would be of interest and use 
to the secretary of an umbrella agency responsible for making certain 
decisions . 

In short, we were looking at sort of a short-term cosmetic type job. 
That was a fairly naive assumption as it turned out, because as we exam- 
ined MMIS, we found a very well structured data base and what I would term 
a fairly neglected management level reporting function within the system. 

The principal symptoms of this neglected reporting function were 
as follows. First of all, there appeared to be an informational gap. 
There was a myriad of detail to support or report on such functions as 
surveillance and utilization review, accounting information, bill process- 
ing, budget projections. Those types of detailed information were readily 
available, and there were a few pieces of very aggregate data readily 
available, but there was a real absence of regularly produced summary 
level type reports from which we could extract what we were really inter- 
ested in. 

We took the approach, of course, of requesting and obtaining some of 
these summary level reports, which were included in various portfolios of 
reports available. And as we reviewed these reports, we found what we 
considered to be the second major symptom of this neglected reporting 

That was, first of all, a lack of general understanding or consensus 
as to what the reports meant, down to the detail that people could not 
agree or really explain the titles of various columns and rows that 
appeared in these summary reports. This is not to say that they have not 
been defined in the documentation supporting the system. It is just to 
point out that the managers supposedly using these systems could not 
readily identify what the report said. 


The second point that we observed was the lack of confidence in the 
integrity of the reports, and it is the type of confidence that evolves 
from a regular use and continued refinement of the information that is in 
the reports. A principal example of this would be the inclusion or 
exclusion of patient days related to Medicare crossover claims. No one 
was quite sure whether they were in or whether they were out, or whether 
they were in in one July and out in the following July. So, it became 
fairly difficult to draw assumptions regarding the length of stay. 

In fact, in our first cut-through, we felt that we had totally 
explained the problem in terms of a one-day increase in the length of 
stay. Well, we found out, in fact, that there had been a change in the 
reporting, and Medicare crossover days had not been included in one of the 
subsequent periods. So it caused a distortion in the figures. 

One point in terms of the Washington system, the MMIS was installed 
in '75 and '76, and certified in '76. So, I don't think these problems 
really relate to shaking down a brand new system as much as they relate 
to a misallocation or an absence of allocation toward the management 
reporting functions of the system itself. 

The approach that we are taking is to try to resolve this or bridge 
this problem, to clean the data, summarize it, and make it available in 
what we feel is a useful and digestible form to the top management of this 
umbrella agency and, first of all, to group the reports into basically 
three categories. 

The first is demand, the second would be supply, and the third 
would be cost. We feel that it is important for making decisions at the 
policy level, that we have information grouped into these three areas. 

The first has to do with a cost analysis, where we begin with what 
has been typically available, which is the cost per capita type informa- 
tion. We have tried to break this down into several additional layers to 
provide what we consider to be essential information, first of all, 
defining problems in the program and, secondly, making decisions relative 
to the program. 

The general key again would be cost per capita. The second break 
would be by program component where we would actually break the cost per 
capita into the various subprograms like hospital cost, physician cost, et 

The third layer down would represent key statistics within each 
program component such as cost per admission, length of stay, distribution 
of physician office visits between regular, intermediate, and intensive 
visits. Finally, a second layer of key statistics where within, for 
example, admissions, we would be talking about distribution of admissions 
between medical and surgical, time period comparisons of procedures and 
diagnoses mix, distributions of hospital costs between room and board, 
ancillary, and other. 


As an example, if you were going down through this array and you 
found out that you had a situation where length of stay was constant 
but costs per admission were up substantially, it seems logical that 
the next thing you would want to look at would be patient mix and the 
intensity of care, and these types of second level statistics assist 
you in identifying those problems. 

Now, going backwards and making that a full pyramid, of course, you 
would look at subprograms like the AFDC, medically indigent, that type of 
program breakdown, and identify on an exception basis whether there was 
any particular client group that was contributing. 

The second set of reports is really what we would term a demand 
analysis, which attempts to take the general key, which is generally 
available, like the number of people eligible, the number of people using, 
and break that down further into what we would term first level statis- 
tics, which would give you utilization type, admissions, office visits, 
outpatient visits, emergency room visits; and then a set of second level 
statistics, which would provide you utilization patterns within admis- 
sions, for example, where you would look at number using and the percent 
of eligibles. And, again, back along the third dimension, we would look 
at subprograms and look at AFDC et cetera, to see if there was any par- 
ticular contributing group. 

The third key component in terms of management reporting at the 
executive level would be a supply analysis, and this, of course, is not, 
to my knowledge, readily available out of MMIS. I think it is important 
in terms of the number of providers certified and the number participat- 
ing, and particularly in the hospital area in terms of the number of 
licensed beds, the percentage of utilization, any pending Certificate of 
Need actions. 

I think these three analyses, cost, supply, and demand, at the 
aggregate level that we have presented, give you an opportunity to present 
in a fairly summary fashion to a chief executive of a large agency, a 
fairly comprehensive picture of the program and the components of the 
program that may be contributing to the problem. I think we could gener- 
ate a little more useful discussion in terms of the types of policy 
options that might be available. With that, I would like to turn it over 
to John for his observations. 


MR. KASONIC: I would like to amplify on what Bruce told you about 
our observations on using MMIS and developing it to its full potential. I 
am going to give you more or less the impressions of a management consult- 
ant who spends most of his time with providers, but still has a fair 
understanding of how the State agency that administers the Medicaid 
program works . 

Now, the key components of our approach — and I think most of the 
speakers today hit on it — is the need to develop an understanding of the 
health care delivery system in order to appropriately manage the Medicaid 

We talk about fraud and abuse. I guess I would rather not talk about 
fraud because that is easier to control than abuse. Abuse is subjective, 
but we know that abuse is a function of the amount of resources available; 
that if we have excess resources, then we are going to have increased 
abuse, because the capacity to deliver the service or the incapacity to 
deliver it will reduce abuse itself. Well, that is a delicate balance and 
it obviously gets into social priorities, and we didn't try to make any 
subjective judgments, but Washington does happen to be a State that does 
have considerable excess capacity in terms of health care services. 

The first step in our approach was to get top management commitment. 
I guess you hear that for every project that you ever start on, that you 
have to have top management commitment. In this case it was absolutely 
essential because, as I will summarize later on, many of the problems had 
political implications. The Secretary of a single State agency is a 
political appointee of the Governor, and obviously, no matter how we want 
to address it, we are going to have to respond to the political system. 

I don't know if Washington is unique — but they have implemented a 
functional organization structure, and about seven or eight years ago when 
I looked at some other agencies, that was a very common structure. So, 
therefore, the Medicaid program officer has to buy his accounting services 
from Data Processing, his analytical services from some financial or 
program analytical group. 

He doesn't have day-to-day supervision of all of his resources. So, 
we structured an integrated team. Bruce became the team captain, and that 
might be surprising to have the budget officer the team captain, but then 
we had people from all of the appropriate areas who understood the health 
system from their particular perspective and understood how the financing 
and operation of the health service delivery system worked. 

The next step, which was a fairly important one, was to examine the 
data base of information we had available. So, we went out and looked at 
the MARS and the SUR system, and we looked at the accounting system, how 
the data flowed, how much was available, and what kind of client eligi- 
bility statistics, what kind of information we got from the PSRO, and so 


forth — what kind of information was available in order to design better 
management controls for the Medicaid system. We next thought that this 
probably wasn't a unique problem and that others had probably studied it 
so maybe we should review the literature. 

We ended up abstracting several hundred articles on Medicaid cost 
control. Most of them were academic. Many of them were prepared from the 
perspective of the Federal government. Many of the studies were financed 
by the Federal government, Urban Institute, et cetera, and so the controls 
and perspectives were either academic or more oriented to how the Federal 
government should control and manage the Medicaid program, rather than a 
particular State. 

And then they got very operational oriented, how to control drugs, et 
cetera. The next thing we did was undertake a review of what some other 
States had done, and to this end we just used the data that is available 
to everyone, regarding expenditures per case, et cetera. We also then 
made some telephone calls. We talked to some people with the MMIS group 
in Washington, some people that are here today, and we talked to some 
different State agencies who are using MMIS. We got hold of the GAO audit 
report, and went back to the first ones that were implemented. We talked 
to people in Minnesota, and so forth. If we were naive and neophytes in 
this area, perhaps others had already developed very sophisticated manage- 
ment information systems, and all we would have to do is adopt them 
for the Washington State program. 

Well, that wasn't the case, and I will cover that later on. The next 
thing we did was focus our study. The Medicaid program in Washington is 
very broad. It includes almost all optional groups and almost all option- 
al services. 

We focused our study on the hospital area largely because that is 
where the bucks were and because that is where the biggest increase of 
acceleration in costs had occurred. We had actually had a decrease in the 
covered population by about three percent, and costs had gone up about 30 
percent in one year. 

We next took a look at the state of the art in technology, what kind 
of computer systems and software were available. We obviously talked to 
the EDS people. We looked at the system that Yale has, which will take a 
data base and manipulate hospital oriented information by diagnosis and 
secondary diagnosis, and so forth. There has been a lot of case mix kind 
of analysis conducted by the University of Washington group. 

Next, we went through the data stratification that Bruce outlined for 
you, and I won't go through that, but we did it manually. We had analysts 
sit down and put together schedules of this kind of information largely in 
a constructive manner of trying to decide if this information, put togeth- 
er in this fashion with a computer, would be of any use to us. So, let's 
do it once manually and see if it is going to be usable. As Bruce 


pointed out, at least it showed us that there were inconsistencies between 
the Washington State Hospital Commission on data and the MMIS, which were 
related to this crossover problem. 

We then did an analysis of data relationships, and some of our 
analysis about length of stay and cost per unit were related not so much 
to the management reporting, but to those short-term solutions that Bruce 
talked about . 

Well, those were basically the steps, and while Washington might be 
unique, I would say that based on my telephone conversations with about a 
half a dozen States, that they are not all that unique in the utilization 
of the MMIS as a management tool and that the whole process seems to be at 
an early stage of development, and that our conclusions resulting from our 
fairly limited couple of month's study might be useful to you. 

I am sure in every area that there are limited resources. We have 
found that the MMIS, as a system, had just deployed all the resources of 
the Department. There wasn't a team or a surplus of physicians or anal- 
ysts that could sit around and take a look at the output of the MMIS and 
make any kind of top level management information systems or reporting 
systems regarding it. 

So that the operation, just running, getting the claims out, tended 
to consume everybody's time and no one really spent a lot of time looking 
through this system. We were only able to get program, fiscal and analyst 
type people to work on the project through the top level management 
commitment. They all had 20 other things to study in the agency, includ- 
ing juvenile rehab problems and adult correction problems and other things 
not related to the Medicaid program. 

We quickly found difficulty to access the computer. You know, to get 
a report from EDS, it takes 30 days if it is not on the routine report. 
You want to get your own people to write a small program, to extract the 
data off of the accounting system. Well, it takes six weeks to get in the 
queue and six months to get the program, et cetera. So that the data we 
saw out there on the MMIS data base was not really accessible through 
the computer because the resources were already consumed doing other 
things . 

The amount of data that we had to deal with was voluminous. Washing- 
ton is a small State. They had 250,000 unduplicated clients eligible last 
year. They processed about 25,000 transactions a day through the MMIS 

The data isn't 100 percent clean. We know that because the system 
doesn't get the feedback necessary to keep the data clean. Because we 
detected this problem with the crossover report, there will probably 
be some cleanup, but if it had been looked at every month, that informa- 
tion would have been detected at an earlier point. Because of the 


excessive data, though, it is hard to get access to it economically. It 
is very expensive to process these. This is a small State. I suppose 
New York or California would just multiply this and probably in a geomet- 
ric progression. 

As Bruce already mentioned, the knowledge of the use of the MMIS was 
very limited. We were quite surprised to see how little the program 
managers really knew and understood the different reports that came out of 
the MMIS. That would have been fine if the budget analysts or the program 
analysts, or whatever would have understood the MMIS, but they didn't 
really understand the reporting system either, and had their own little 
schemes for devising the information necessary for management on kind of a 
reactive basis. We found the knowledge of health delivery wasn't what we 
had expected it to be, even in the program people. They have largely been 
claims processing oriented, get the bills in, get them processed, get them 
out . 

They are insensitive to changes that Bruce talked about, where you 
put some squeeze on the primary physicians, and the next thing you know 
the emergency room is full, or you put some squeeze on the hospital and 
some other problem pops up in the system. 

The orientation of the program managers and of the analysts, I think, 
in the agency has largely been reactive. They didn't view it as their 
role to sit down and think up what kinds of things top management would 
want in order to make policy decisions about the Medicaid program. Their 
job was when top management asked a question, to be able to respond in 
an intelligent and factual fashion, which they could do with all these 
detailed operating reports. 

It left the problem of deciding what questions to ask to top manage- 
ment, and yet gave top management no reports to deal with this particular 

The rules and regulations we found were quite confusing. In Wash- 
ington State we have these medical consultants that do prior admission 
reviews for surgical cases, and we have a PSRO, but we are not sure where 
the accountability is between those two groups. 

The PSRO, interestingly enough, didn't produce any routine 
reports for the Department, and when we listed in a letter specific kinds 
of things we would like to have, which I think you would find fairly 
routine from Utah or some of the other States, they wanted $1,200 to 
produce the reports — not a lot of money, but this does foster the idea 
of what is the accountability of the PSRO to one of the principal provid- 
ers or payers for health care in the States. 

Now, we do think that Washington is probably unique in the scope of 
its program. It provides nearly all services. Obviously, this will 
affect your unit statistics, and so things that might be good indicators 


in Washington, might not work at all in New Mexico, where you don't have a 
medically needy program. 

The organization of your government will obviously be a major factor 
as you would look at designing an improved use of the management informa- 
tion system. The single State agency makes it kind of easy. You only 
have to deal with one guy. But if the Medicaid program has to buy its 
data processing service from a Data Processing Department and its account- 
ing services from the Comptroller's Office of a State, I am sure you are 
going to have different kinds of problems in terms of coordinating those 
resources . 

We found the health planning functions are relatively confused in our 
State. The role of the HSAs versus the State Coordinating Council and the 
State Planning Agency is relatively uncertain. Washington hasn't imple- 
mented a law in this area, but these are the folks that control the amount 
of resources that are available. 

When you have an average occupancy of 65 or 70 percent in your 
hospital beds, you are not going to get that under control until your 
population grows, which in Washington's case might be 25 years, or until 
you close some hospitals. And, you know, you are really coming down to 
that kind of judgment, and these planning agencies are presumed to move 
into that role, and yet their roles aren't all that clear. 

In Washington, we have a State Hospital Commission that exacerbates 
the problem. They believe that Medicaid should pay the same price as 
everybody else. They see their role as a referee in the purchase of 
health services. They perceive that the Hospital Commission's role is 
to set the price, and then everybody pays the price that they set. Then 
they negotiate the price with the providers based on a review of their 
budget and the volume of services rendered; a different approach that is 
going to affect how Washington reacts to its management information needs. 

Then, the PSRO in Washington functions probably different than the 
PSRO in other places, and, finally, we have a demonstration project that 
involves all the hospitals in the State. I won't go into the demonstra- 
tion project, but certainly where you have a demonstration project in 
effect, you are going to need different kinds of management information in 
order to observe how well your Medicaid system is performing when you 
compare it to others. 

We think the top level commitment is essential. The decisions that 
you make are going to be political actions that are going to affect the 
providers. It is going to affect their money. The Certificate of Need is 
clearly the most obvious. If you are going to cut out the number of CAT 
scanners that are authorized — in this case, the single State agency has 
the Certificate of Need power — you are going to find a lot of people 
down on the Governor's steps talking to him or talking to legislators 


about their need for a scanner in their particular hospital, but obvious- 
ly, we have to control them on a Statewide basis, not just in my hospital. 
So, if you are going to take actions that are going to result in those 
kinds of political reactions, then you have got to be ready to deal with 
them, and you can't do that unless the Secretary of the Department and the 
Governor and other senior cabinet officers are committed to making change. 

Obviously, you need an integrated team. I think the problem, as it 
has been depicted here today and as you know it, is not the kind of thing 
that any one person can know all the facets. So, you are going to have to 
rely on the fiscal analysts and the computer system people and the program 
people to work together as a team. 

Understanding the health delivery system is absolutely essential. It 
is fruitless to try to put in controls when you don't understand what you 
are trying to control. If you don't understand what the system's reaction 
is going to be to a new policy decision, then you shouldn't implement the 
policy decision. 

Understanding the nature of your data base and how the information 
goes up the pyramid is obviously very important, and to be able to organ- 
ize and relate the data to key variables is extremely important, and it 
has got to be done by people who know your setting and your situation. 

You can't hire Dick Heim to design the perfect management control 
system and then just plug it in in New York or Connecticut or whatever. 
It has got to be tailored to your particular needs and your particular 
setting, your program scope, your management, your organization, et 

You have got to be able to identify inconsistent data variations, and 
so you have got to be prepared to do that. Then you have got to be 
prepared to take decisive action when it happens. You have got to be 
prepared to take action that you don't want to take. 

One little example: let's say that your nursing home industry feels 
that you are not reimbursing them on an appropriate cost reimbursement 
formula. That is probably a problem unique in Washington, but maybe 
others have it. 

If you undertake a comprehensive study to examine the formula and you 

design what you believe is a conceptually sound formula, then you have got 

to be ready to live with the results even if it means you have got to pay 
more money rather than less. 

So, when you go into these programs where you are going to get more 
information to make a program decision, once you get the information you 
are going to have to make the decision that tells you to. To try to 
decide what the answer is and then make the data base generate the infor- 
mation you want to justify that answer, is the way it has been done for 


years. That is what the R & S section was for in most of the social and 
health services departments. 

In summary, then, you are plowing new ground for Medicaid people. 
There is no easy answer. It is not in the literature. It is not in 
books , that you can drag it out . You are going to have to dig it out . 

The data available from your MMIS system is excellent. There is no 
question but what unbeknownst to the government, they have now a latent 
data base of information about health care delivery services that national 
health insurance planners ought to be making full use of and probably 
aren't because of the level of detail and the editing, and so forth, that 
goes into the front end data. 

Even though there are some problems with it, the data base that is 
available from the MMIS system is outstanding. The technology is avail- 
able, and it is cost effective, and is getting more so. Pretty soon you 
can get a whole computer on that table that used to fill up this room, and 
you will get it for one-hundredth the price, and the price is going to 
keep going down. So, the technology is there. 

The application of the technology to your data is not so easy because 
that takes organization, it takes people, it takes dollars, and those 
dollars don't show up on the budget as program dollars. They show up as 
administration dollars, and the administration dollars are pretty sensi- 
tive. We want to put the money out where the people are, where the 
service is, not in the front office where the administration is. 

You have legal and regulatory barriers, and the Congress has seen fit 
to recognize these, and offer to waive them at least for demonstration 
projects. You have got social barriers. There is a natural conflict 
between the delivery of service and cost savings. 

If we closed all the emergency rooms in Albuquerque tonight, we would 
save some money out of the Medicaid program. Undoubtedly, there would be 
some social consequences of that. Those are the kinds of decisions, not 
all of which are black and white, because as you move down the continuum 
and get into that gray area, then you are going to be making subjective 
decisions that trade off social gains for financial gains. You have these 
political difficulties that I mentioned before, your Certificate of Need 
and your legislature, et cetera. 

We think that it is essential, if you are going to maintain the 
health resources out there for the Medicaid program recipients and you are 
going to get more service for the dollars you have available, that the 
only way you are going to get that is through more efficiency in the 
system. And the only way you are going to get more efficiency in the 
system is through better management controls so you can see where the soft 
spots are, i.e., the abuse, rather than the fraud. 

Thank you. 


Future Requirements 

William Hickman, Director 
Division of Analysis and Evaluation 
Medicaid Bureau, HCFA 
Washington, D. C. 

Al Dobson, Director 

Division of Beneficiary Studies 

Office of Policy, Planning and Research 


Washington, D. C. 

Charles McDermott, Comptroller 
Oklahoma Department of Institutional 
and Rehabilitation Services 
Oklahoma City, Oklahoma 


MR. HICKMAN: I would like to speak to you this afternoon about the 
Medicaid minimum data set and bring you up to date with where we are on it 
and what is in it . I am pleased to report that we are moving forward with 

We expect the package to be at the Office of Management and Budget 
about two weeks from now. It currently rests with the Report Clearance 
Officer in HCFA, who is starting to move it through the clearance process. 

As soon as it goes to OMB, we will send a copy of it to you, so that 
you are aware of exactly what the reports are that we are submitting to 
OMB. Obviously, OMB has the authority to make changes, but I do want to 
keep you informed with the version as much as we know it. 

The implementation date is scheduled to be October 1 of this year. 
We are hoping for quick approval through OMB so you have at least six 
months to gear up for it. With an October 1 implementation date, that 
essentially means that the first monthly report will be due at the end of 
November, 30 days after the end of the first month. 

In addition to the actual preparation of the minimum data set and 
moving it to OMB, we have also been developing plans for technical as- 
sistance during the implementation stage. We are planning to have some of 
our own central office staff out in States, trying to make sure that there 
is clear understanding of the definition of the terms in the report, so 
that we are going to get consistent data. 

We also will have available some contract resources and also plan to 
make use of some Regional Office staff, so that we will be available in 
the State with guidance on clarifying any questions about what is expected 
on the forms . 

Let me move for a moment to what the items are in the minimum data 
set. Basically, the minimum data set is revision of the current monthly 
form, the 120, on which States report Medicaid data to HEW, and a revision 
of the annual form, the 2082. It also includes a substitution of a 
quarterly EPSDT report for the current EPSDT data that is reported on a 
monthly 120. 

We are asking in the minimum data set what we believe are very basic 
data necessary for the management of the program and, really, the credi- 
bility of our being aware of what is going on in Medicaid. I would like 
to run through some examples of some of the data. 

First of all, eligibles. We currently do not get any report on how 
many people are actually holding Medicaid cards. Beyond the obvious need 
for public accountability of how many people are in the program, the lack 
of this data obviously hampers policy analysis when we try to think in 
terms of changes to Medicaid eligibility policy, and are not totally aware 


of how many people there are now. 

We have recipient counts, and we end up in our analyses trying to 
plug some kind of a "guesstimate" factor of a relationship between recip- 
ients and eligibles. 

Beyond just simply collecting eligibles, the minimum data set will 
change the classification of recipients. Currently, the data that are 
reported have really been designed to pick up Medicaid recipients in 
relationship to their public assistance status only, and have not really 
recognized the Medicaid structure of both a categorically eligible program 
and a medically needy program. So, in the Medicaid minimum data set, 
there will be breakdowns of both eligibles and recipients by these two 
categories . 

Another major element that we don't collect now, that will be includ- 
ed in the minimum data set, are the number of claims processed. We hope 
to use a report on claims processing to improve our budget forecasting by 
getting an idea of the lag time in payment of claims and also some meas- 
urements of efficiency of claims processing by looking also at those lag 
times in terms of speed of claims processing. 

Another element that will be included are providers participating in 
Medicaid, again, a very basic element of what the structure of the program 
looks like and what the trends are in the States in terms of provider 

We also will be looking at EPSDT accomplishments. For the first time 
we will be asking for reports on how many children actually get to treat- 
ment as opposed to the current reporting form which just picks up refer- 
rals, and, of course, has screens as well. 

Also, recognizing that we are in the midst of a major Federal move to 
improve the immunization status of children, we think it is very important 
to, on the EPSDT reports, get information about the extent to which 
children are not immunized at the point at which they are seen in EPSDT, 
and the extent to which they come up to full immunization by the time the 
program has been through treating them. 

Another element that will be in the minimum data set will be an 
improved basis for calculating unit costs. Right now we do get some units 
of service and we also get some expenditures by type of service, but there 
is no way to break out those expenditures to segregate expenditures for 
co-insurance and deductible. Obviously, if you just simply divide total 
expenditures by numbers of units of service, and some of those things in 
there are co-insurance and deductibles, that is not going to give you a 
very meaningful measure. We hope to correct that through the minimum data 
set . 

We would also move towards picking up payments through health insur- 


ance plans, so that we can make some comparison of States that are going 
through health insurance programs such as dental services, with costs in 
other States. 

Those are really the major elements that you are going to see changed 
in the minimum data set. Some other elements are some changes in the 
racial-ethnic categories of eligibles to conform with OMB standards; a 
more specific breakout of types of mental health facilities, breaking it 
out between SNF/ICF care for 65 and over and inpatient psychiatric facili- 
ties for 21 and under; and the addition of rural health clinics as an 
expenditure item. The rural health clinic services have been introduced 
since the last report was put together. 

We have been in the process of developing this minimum data set for 
more than two years now. We have had a number of discussions with States, 
both through the auspices of the State Director's Council, through the 
auspices of the APWA, and through formal submission of draft minimum 
data set to all States for a written comment. We have made a number of 
changes as a result of your comments. We think we now have put together a 
set of requirements that we can move ahead with. 

I would like to give you some additional indications of what I think 
is coming down the road a little bit further. One thing is the need for 
data on performance in MMIS. There will be some categories of data, I am 
sure, that will be picked up on reports, and that is yet to be worked 

The other item that I can project at this point is administrative 
costs. We currently are conducting a nationwide survey of administrative 
costs in the Medicaid program under the auspices of the State Director's 
Council. It was actually the recommendation of the State Medicaid Direc- 
tors' Council at their last meeting that we do this sort of study because 
there is a lot of interest among States as to how people are allocating 
resources to various functional areas in the Medicaid program, and how one 
State compares with another in terms of number of staff and dollars spent 
in these administrative areas. 

In addition to taking the results of this survey and feeding it back 
to States for their own purposes, we also will use this survey as a test 
of the methodology to be able to go on to an ongoing report in the admin- 
istrative cost area. 

Beyond these reports, we are thinking beyond the actual paper report 
form to an era of tape-to-tape sampling and submission of magnetic tapes, 
which I am sure will be appealing to those who have to worry currently 
about report forms. 


MR. DOBSON: I am going to take a slightly longer view than many of 

the issues and discussions we have heard today. I come to you primarily 

as a data user as opposed to a data builder. I am an evaluator. I have 
been for nearly a decade now. 

The way I got into the notion of tape-to-tape is in my attempts to 
use Medicaid data in the past. One of my primary responsibilities in the 
past few years was the PSRO evaluation, and as we tried early on to use 
Medicaid data in the PSRO evaluation, we were continually and thoroughly 
frustrated with that attempt. 

As we have tried to do other evaluations with Medicaid data, from 
time to time we find that it is rather difficult to do. It became reason- 
ably clear to myself and many others that it would be a useful thing to 
have a Federal system that sort of paralleled the system we now have with 
Medicare data, whereby with the Medicare statistics we have a central data 
file which we can access to do the many kinds of evaluations and mangement 
reports we would like to make. 

What I would like to outline today is the logic of a future "tape-to- 
tape system." The purpose of tape-to-tape would primarily be to provide 
the States and HCFA with consistent program data which can be used to 
enhance management and development of the Medicaid program, and to enhance 
the analysis of programs which can only be evaluated with compatible 
Medicaid data. 

The basic notion of the tape-to-tape system is to use the existing 
data elements in MMIS and variations that may be coming down the pike in 
the next year or so, to provide a Federal MMIS component, as it were. 
That is to say, data that we will have at the Federal level to do our work 
with. Clearly, State cooperation will be required, and it will be a joint 
effort all the way if we are ever to have the system from the majority, if 
not all of the States. 

I think the primary use to the States of the system will be a compar- 
ative purpose: how does your State Medicaid system compare to other 
States in terms of use rates, beneficiary use, et cetera? 

From the point of view of the Feds, I point out again that we will 
use it in an evaluative sense and a program management sense. The system 
will provide primarily expenditure, use, reimbursement and provider data 
in a consistent format to the HCFA and to other Federal agencies. 

The system will be used primarily for policy analysis. That is to 
say, basic "what if" questions: the cost containment, management perspec- 
tive, the components of expenditures, factors leading to changes in prices 
and quantities, so as to determine future expenditure patterns. 

With such a system, we could perhaps look better at fraud and abuse, 
second opinion surgery activities, PSRO evaluation, EPSDT, sterilization, 


abortion, and analysis of expenditures and use. Those would be the kinds 
of consistent analyses that we could provide at the Federal level, that 
right now we just simply cannot do. 

The system will be based, as I envision it, on a series of rate 
analyses whereby we emphasize days of care and discharges for various 
providers, average length of stay, diagnoses and procedures, and then a 
whole series of descriptive statistics, patterns of utilization, who 
receives services, what is provided, and what does it cost, from a consis- 
tent level across all the States and at Regional levels. 

In terms of the file structure, in a very simplistic sense, we would 
have a claims file, an eligibility file, a provider's file, administrative 
and analytical subfiles, and supplemental data, an area resource file, and 
master facility inventory data. We would merge those types of files as 

The claims file would be the basic heart of the system, which would 
be, for the most part, based on individual unit records. We would have 
sampling frames, because, as you well know, I don't believe we would want 
everything for all of the components of the claims file system. 

In the Medicare system, for instance, we have a 20 percent file, two 
5 percent files, a 1 percent sample, a 40 percent sample, depending on 
what the issue is. And likewise, I expect, as we develop the claims file 
for the Medicaid data system, that we will take various files, depending 
on what the issue is and how much data we think we need for a given 

As I said before, we will look at total days of care, discharges, 
average length of stay, and those kinds of things for hospitals, and we 
will look at physician and other covered services, as well, and perhaps we 
could include claim statistics for those kinds of monitoring. 

The eligibility file, right now seems to be the hardest one to come 
up with, at least at the Federal level. We will soon be asking for 
eligibility statistics. The eligibility file will be, from my point of 
view, similar to the Medicare enrollee file. 

The primary purpose of that is to assist us in the calculation of 
rates. As of now, I think very few people have a consistent notion of 
what Medicaid use rates are from State to State, by region to region, et 
cetera; where, on the other hand, we have a very good notion of what 
Medicare use rates are. The primary distinction is, I believe, we have 
consistent data at the Federal level for the Medicare system, and we are 
able to calculate these use rates. 

Without use rates, it is very difficult to do any substantive analyt- 
ical undertakings at all, as we have found in the past. You are pretty 
much limited to average length of stay, number of services per benefici- 


ary, et cetera, which I don't believe are particularly valuable or power- 
ful from an analytical point of view. 

I think we will have to puzzle at great length about what the eligi- 
bility file really means. I suppose that we will have to have an SSI, an 
AFDC, and a Medical Assistance only, or medically needy subcomponents, but 
Bill has been telling me that is a very simplistic notion; as we go from 
State to State, we will have to build up the eligibility file, because 
in various States, we define things differently. But sooner or later we 
have to come down on reasonably consistent definitions, so at the national 
level, I hope we can have an eligibility file that we can cut in different 
ways and make consistent analyses to the extent that that is possible 
across the States. 

The provider file would primarily provide us with type of provider 
and service, characteristics of facilities, number of beds, et cetera, 
vocation of provider, and those sorts of activities. 

In terms of the sequence for development of the tape-to-tape system, 
I think the first step is obviously today, preliminary discussions. Some 
of my folks have been here talking to you about the potential for doing 
this, and we have found that some of you are quite receptive to the 

Already initiated is the MMIS Task Force. My division will have some 
input into the development of the Task Force, and the notion of tape-to- 
tape will be something that we will be expounding upon as the MMIS Task 
Force gathers momentum in the upcoming months. 

We will conduct a needs assessment, as it were, to find out what 
people, at the Federal level at least, really think ought to be in a 
tape-to-tape system. We will review the development and use of the 
Medicare Federal statistical system only because that is a system at the 
Federal level that we have been able to use, and make some analyses, the 
PSRO evaluation would be a case in point. 

We will develop data elements because, as I said before, we will have 
to be constrained, at least in the near term, to what is in MMIS. It 
amounts to figuring a way to convert MMIS data into a system or tape 
format, such that we can use it in a consistent fashion at the Federal 
level. That will involve analyzing existing State MMIS systems to get 
some idea of the comparability of our needs and the data bases, as you 
have them, and your ability and our ability to cooperatively develop a 
system that you would be able to put on a tape format and render to us. 
Then, we could put out our reports and the descriptive statistics that we 
could feed back, and do the analyses that we would like to do. 

We are now considering implementing the prototype systems in a few 
States, and I suspect that we will be back to some States in the not too 
distant future to ask for cooperation to try to develop and actually put 


on line this tape-to-tape system as we envision it. As we work with a few 
States, I expect that we will encounter difficulties that were unforeseen, 
get a much better idea of the actual file structures that I have been 
discussing, and a much more precise notion of how we will actually use the 
system once in place. 

After we have developed a few prototypes in States, then we will be 
able to go much broader and I believe to market, or sell, or cooperatively 
develop, however we would like to put it, the concept of tape-to-tape. 

In terms of the time frame, I really don't have too good a notion of 
how long it would take to put this across in all the States or most of 
them. But we would like, within a year or so, to start our implementation 
in a few States to develop a few initial prototype systems. 

I think I will conclude with just one remark. At least in my mind, 
the primary problem with most data bases is people try to answer too many 
questions. Everybody wants to answer something with data bases. Hence, 
they tend to grow like Topsy and really become basically unmanageable. 

My guiding principle in thinking about tape-to-tape is to ask prob- 
ably the impossible question: How can the system both be comprehensive 
and administratively simple? There may be no answer, but at least I will 
puzzle over that and keep it in mind as we work with you in the develop- 
ment through the MMIS Task Force and the initial prototype development, to 
keep the thing manageable so people can actually use it, because if it 
isn't usable, I just think there is too much bother to even fool with 

Thank you very much . 


MR. McDERMOTT: The favorite time on any program is the last day 
at the last hour, I guess. Actually, we are already at that point where 
we should be quitting. So, I won't take a lot of time, but the way I see 
this is sort of recycled. 

Larry Levinson dealt with subjects that some of us, who have been 
around too long, remember having discussed earlier. In 1965, when the 
Medicare-Medicaid bill was passed, they had a small group of people in 
Washington to discuss how we could make these two programs work together. 

The States suggested, first of all, that we adopt Social Security 
numbers as a common identifier. That was rejected by the Social Security 
Administration because it interfered with their claim number concept. 

There was also discussion about hospital reimbursement and the need 
for some common approaches. Well, those came along later, but then when 
we got to talking about the common audit, we discovered that the common 
audit was considered to be an audit by the Bureau of Health Insurance with 
States helping to pay for it. So, some of those subjects, that we are now 
dealing with on a very amiable basis, have previously been discussed. 
Maybe as time passes, things will get better. 

The way I see the future, as a State administrator, is responding 
more and more to direction as it is laid down to the Federal government. 
Larry's discussions sort of minimized the State involvement in these 
integration projects, although there do seem to be some committees of 
the State Medicaid Directors who are involved in discussions. 

I am not sure that the discussions are as productive. Now that I 
have reacted to those things, I will carry out my own program assignment 
and discuss a couple of things that we are involved with. 

One of them is timely claims processing. There is a proposed reg to 
implement a law that was to be effective July 1, '78, on requiring that 90 
percent of clean claims be processed within 30 days. The definition in 
the proposed reg was a little bit different than the one Larry mentioned, 
in that it said that a claim would be all of the services covered by the 
claim on a given day, which is a little bit different than a line item. 
Of course, that is different from the Medicare definition. 

It was not very liberal in the definition of a clean claim. It 
defined a clean claim as one that did not require any more written infor- 
mation from a provider or a third party. Now, there are a lot of other 
problems that you have with claims that could interfere with the process- 
ing that they didn't recognize. 

As an illustration, there are the problems around eligibility where 
it is involved in a State-supervised, county-administered system. If 
the eligibility is not correct, it would appear that in order for you to 
stay within the guidelines, it would direct that you send it back to the 


provider and let him straighten out the eligibility problem. Many of us 
were more accomodating and tried to straighten it out through our own 
files or intervention with internal department procedures. 

That law, as well as the regulations, did exempt institutional 
providers from the regulations. So, that would not go into the measure- 
ment . 

There is another new law on the books that you should be aware of, 
although I don't know that it is going to affect you directly, except as 
it relates to your relationship with contractors and providers. It is 
Public Law 95-559, the Health Maintenance Amendments of 1978. 

There is an amendment to Title XIX that adds a paragraph into 1902. 
What that requires is, in the case of a State plan for medical assistance 
under Title XIX, that each State or local officer or employee, who is 
responsible for the expenditure of substantial amounts of funds under the 
State plan, each individual who formerly was such an officer or employee, 
and each partner of such an officer or employee shall be prohibited from 
committing any act in relation to any activity under the plan, the commis- 
sion of which in connection with any activity concerning the United States 
Government by an officer or an employee of the United States Government, 
an individual who was such an officer or employee, or a partner of such an 
officer or employee is prohibited by Section 207 or 208 of Title XVIII, 
United States Code. 

What that means is if you are now involved in Title XIX, you will be 
treated as if you were Federal employees. So, you will be subject, under 
criminal penalty, to the conflict of interest statute. 

I think those are the two important things that I wanted to discuss. 
The other less important thing is the rural health clinic law, which has 
been mentioned briefly. From a claims processing standpoint, that probab- 
ly isn't as important as from a program standpoint. 

In effect, by Federal regulations, Title XVIII is to pay an all-in- 
clusive rate. The top limit on that is $27.30, but it is an all-inclusive 
rate regardless of what is provided in the rural health clinic. The rural 
health clinic is a clinic in a rural setting. It is under the supervision 
of a licensed physician, but it can be operated by either a nurse practi- 
tioner or a physician assistant depending upon what is permitted by State 

It is possible under the Federal reimbursement for the supervising 
physician to not be on the premises. In some areas, I understand that 
there may be 20 to 30 rural health clinics under the supervision of one 
physician, who would employ a nurse practitioner or a physician assistant. 
In effect, the billing would be for that all-inclusive rate, which would 
include the service of the physician assistant, any lab services, any 
x-rays, or any other service provided by the clinic. 


What the law permits is for Title XIX, in its plan, to either provide 
for reimbursement in that same form, or to measure the services under a 
different mechanism, as provided elsewhere in the State plan. 

As I understand, most of the State plans that have been amended have 
picked up the Title XVIII provisions. If they also pick up the Title 
XVIII billing form, they don't have enough data to measure for EPSDT what 
a child is receiving and the tracking, and it also does not permit some 
other analysis of care in relationship to diagnosis to be done. All those 
are program decisions you need to be aware of. Thank you. 





Billy Joe Camp 

External Affairs Administrator 
Medical Services Administration 
2500 Fairlane Drive 
Montgomery, Alabama 36111 

Dyke Nelson 

MMIS Coordinator 

Medical Services Administration 

2500 Fairlane Drive 

Montgomery, Alabama 36111 

David M. Davidson 

Medical Assistance Program Officer 

Pouch H-07 

Juneau, Alaska 99801 

William D. Dawson 

Deputy Director 

Medi-Cal Division 

California State Department of 

Health Services 
Room 1540, 714 P Street 
Sacramento, California 95814 

Kay Moser 

Chief, Center for Health Statistics 
California Dept . of Health Services 
744 P Street, Room 777 
Sacramento, California 95814 

William A. Ball 

Chief, Surveillance & Utilization 

Medical Assistance Division 
614 H Street, N.W. 
Washington, D. C. 20001 

C. Wright Hollingsworth 
Supervisor SUR Unit 
Florida Medicaid Program 
1123 Tomasville Road 
Tallahassee, Florida 32303 

Thomas W. King 

Director, Statistical Reporting 
Health and Rehabilitation Services 
1317 Winewood, Bldg. 3, Room 333 
Tallahassee, Florida 32301 

Robert Dorn 

Director, Operations Div. 
Dept. of Medical Assistance 
1010 W. Peachtree Street 
Atlanta, Georgia 30309 

Ellis R. Lamb 

Director, Information Systems 
Department of Medical Assistance 
1010 West Peachtree Street 
Atlanta, Georgia 30309 

Chris Leathers 

Director of Planning & Research 

Department of Medical 

1010 West Peachtree Street 
Atlanta, Georgia 30309 

Robert R. Melvin 
Director, Div. of Quality 

Dept. of Medical Assistance 
1010 W. Peachtree Street, N.W. 
Atlanta, Georgia 30309 

David B. Poythress 


Dept. of Medical Assistance 

1010 W. Peachtree Street 

Atlanta, Georgia 30309 

Denise Chuckovich 

SUR Analyst 

Bureau of Medical Assistance 

700 W. State Street 

Boise, Idaho 83702 

Derek Wang 

MMIS Supervisor 

Bureau of Medical Assistance 

700 W. State Street 

Boise, Idaho 83705 

Bruce Roberts 

Administrative Analyst 


State Office Building 

Indianapolis, Indiana 46204 



Robert F. Smith 

Assistant Administrator, Medicaid 
100 N. Senate Avenue 
Indianapolis, Indiana 46204 

Gay N. Baker 

Administrative Assistant 

Utilization Review Section 

Iowa Department of Social Services 

5th Floor Hoover Building 

Des Moines, Iowa 50319 

John G. Hall 

Executive Project Director MMIS 

8625 S.W. 61st 

Topeka, Kansas 

Charles E. Walker 
State Office Building 
Topeka, Kansas 66612 

M. Lonnie Cox 

Staff Assistant to Director of 

Medical Assistance 
Department for Human Resources 

Frankfort, Kentucky 50601 

Jake L. Canova 

Assistant Director 

Louisiana Medicaid Program 

P.O. Box 64065 

Baton Rouge, Louisiana 70809 

Priscilla Carney 

Director, Div. of Med. Surveillance 
Maine Dept . of Human Services 
Augusta, Maine 04330 

Paul M. Allen 

Director Medical Services Adm. 

Michigan Dept. of Social Services 

300 S. Capitol Avenue 

Lansing, Michigan 48926 

Bruce U. Kozlowski 
Director, MMIS Analysis & 

Development Division 
Medical Services Administration 
300 S. Capitol Avenue 
Lansing, Michigan 48926 

Robert Baird 

Assistant Commisioner 

Minnesota Dept. Public Welfare 

Centennial Building 

St. Paul, Minnesota 55155 

Linda Stella 

Supervisor, General Support Svcs. 

SURS - Minnesota 

690 N. Robert Street 

P.O. Box 43208 

St. Paul, Minnesota 55164 

William R. Allen 

Deputy Director 

Mississippi Medicaid Commission 

P.O. Box 16786 

Jackson, Mississippi 39206 

Thomas Gatewood 

Assistant Director 

Mississippi Medicaid Commission 

P.O. Box 16786 

Jackson, Mississippi 39206 

Linda Logsdon 

Medical Claims Payment Supervisor, 

Medical Services Section 
Missouri Division of Family 

P.O. Box 88 
Jefferson City, Missouri 65103 

Rex Peterson 

Systems Analyst III, MMIS Project 

Missouri Dept. of Social Services 
313 W. McCarty 
Jefferson City, Missouri 65101 

Jim Simmons 

Systems Analyst - MMIS Project 

313 W. McCarty 

Jefferson City, Missouri 65101 

Neal Ostby 

Medical Services Supervisor 


Helena, Montana 59601 



Jerry L. Bahr 

Chief, Research & Statistics 
Department of Public Welfare 
301 Centennial Mall 
Lincoln, Nebraska 68508 

John Charles 

Unit Manager, Medical Svcs. Div. 
301 Centennial Mall, South 
Lincoln, Nebraska 68502 

Don Hogg 

Chief of Medical Services 
Department of Public Welfare 
301 Centennial Mall, South 
Lincoln, Nebraska 68502 

John F. McDonald 

Chief, Payments & Data Services 

Nebraska Dept . of Public Welfare 

301 Centennial Mall, South 

5th Floor 

Lincoln, Nebraska 68509 

Maureen A. Murray 

Medical Data Processing Consultant 

Nebraska Dept. of Public Welfare 

301 Centennial Mall, South 

5th Floor 

Lincoln, Nebraska 68509 

Robert W. Moore 


New Hampshire Division of Welfare 

8 Loudon Road 

Concord, New Hampshire 03301 

Joseph J. Piazza 
Assistant Director 
New Jersey Medicaid Program 
324 E. State Street 
Trenton, New Jersey 08625 

Alan G. Wheeler 

Acting Deputy Director 

New Jersey Division of Medical 

Assistance and Health Services 
324 E. State Street 
Trenton, New Jersey 08625 

F. Richard Atkinson 

N.M. Department of Human Services 

P.O. Box 2348 

Santa Fe, New Mexico 87503 


Georgia M. Glasgow 

Medical Care Administrator 

Supervisor SUR Unit 

P.O. Box 2348 

Santa Fe, New Mexico 87501 

Patricia Golubski 

Medical Care Administrator 

Medical Assistance Bureau 

N.M. Department of Human Services 

P.O. Box 2348 

Santa Fe, New Mexico 87503 

Bruce Weydemeyer 

HSD Medicaid Bureau 

Box 2348 

Santa Fe, New Mexico 87501 

Herbert Alfasso 

Medicaid Management Information 

New York State Department of 

Social Services 
40 North Pearl Street 
Albany, New York 12243 

Charles Christopher 
Deputy Commissioner 
New York State Department of 

Social Services 
40 North Pearl Street 
Albany, New York 12243 

Martin J. Conroy 
Assoc. S.S. Program Specialist 
Department of Social Services 
Division of Medical Assistance 
40 North Pearl Street 
Albany, New York 12243 

Edwin C. Riley 

Assistant Director North Carolina 

Medicaid Program 
336 Fayetteville Street Mall 
Raleigh, North Carolina 27601 

Mark Rolling 

SURS Coordinator 

Social Service Board of North Dakota 

16th Floor Capitol Building 

Bismarck, North Dakota 58501 

David J. Zentner 
Assistant Medicaid Director 
16th Floor Capital Building 
Bismark, North Dakota 58501 


Lowell Lenhart 

Management Coordinator 

DIRS Oklahoma P.O. Box 25352 

Oklahoma City, Oklahoma 73105 

Charles F. McDermott 

Comptroller Oklahoma DIRS 

801 N. W. 41 

Oklahoma City, Oklahoma 73118 

Philip J. Smith 
Adm. Assistant 
P.O. Box 25252 
Oklahoma City, Oklahoma 

Oklahoma DISRS 


Howard W. Stansberry 

Medical Services Assistant 

Oklahoma Department of Institutions 

Social and Rehabilitation Services 

P.O. Box 53034 

Oklahoma City, Oklahoma 73105 

Mrs. Frances H. Walpole 

Systems Analyst 

Oklahoma DISRS 

2232 N.W. 45th Street 

Oklahoma City, Oklahoma 73112 

Allen Z. Miller 

Director, Bureau of Systems 

PA Department of Public Welfare 
7th Forester Street 
Harrisburg, Pennsylvania 17120 

David S. Feinberg 
MMIS Project Director 
Department of Public Welfare 
Commonwealth of Pennsylvania 
533 Health and Welfare* Building 
Harrisburg, Pennsylvania 17120 

Robert H. Stearns 

Executive Assistant to Commissioner 

Department of Social Services. 

Box 1520 

Columbia, South Carolina 29202 

Mary Awbrey 

Chief Systems Development 
2800 S. Interregional 
Austin, Texas 78758 

Nancy C. Norris 

Special Assistant, Systems Development 

Department of Human Resources 

John H. Reagan Building 

Austin, Texas 78701 

Hector Saenz 

Assistant Chief of Staff Services 

Medical Programs 

Department of Human Resources 

John H. Reagan Building 

Austin, Texas 78789 

Robert W. Tyndall 

Information Development Specialist 

Department of Human Resources 

John H. Reagan Building 

Austin, Texas 78701 

Sharon Wasek 

MMIS Manager, Utah Department of 

Social Services 
Office of Health Care Finance 
150 W. North Temple 
Salt Lake City, Utah 84040 

Bruce Ferguson 

Chief Office of Budget Services 
Department of Social & Health Services 
4118 Green Cove Street, N.W. 
Olympia, Washington 98502 

Wirt J. Stone 
Medical Care Specialist 
Department of Welfare 
Charleston, W. Virginia 25302 

Jaqueline K. Crumb lis s 
Claims Supervisor, Title XIX 
Hathaway Building 
Cheyenne , Wyoming 



Richard Beisel 
Statistician, HCFA Office of 

330 C Street, S.W. 
Washington, D. C. 20201 

Elaine Blackman 

Institute for Medicaid Management 

4036 Switzer Building 

330 C Street, S.W. 

Washington, D. C. 20201 

Daniel C. Boyle 

Chief, State Management Group 

Corrective Action Project 

Office of State Operations 

Medicaid Bureau 

Room 1319, Mary E. Switzer Bldg. 

330 C Street, S.W. 

Washington, D. C. 20201 

Joseph J. Ciaravella 

HCFA, Contractor Operations 

6401 Security Boulevard 
Baltimore, Maryland 21235 

Al Dobson, Director 

Division of Beneficiary Studies 


330 C Street, S.W. 

Washington, D. C. 20201 

Eugene M. Fischer 

M & P Analyst 

Director of Systems 

HCFA Medicaid 

6401 Security Boulevard 

Baltimore, Maryland 21235 

Rick Friedman 
MMB Director's Office 
330 C Street, S.W. 
Washington, D. C. 20201 

Richard W. Heim 
Director, Medicaid Bureau 
330 C Street, S.W. 
Washington, D. C. 20201 

Harvey D. Heyman 
Systems Analyst 
Division of Information 

Systems, MMB 
300 C Street, S.W. 
Washington, D. C. 20201 * 58 

William Hickman, Director 

Division of Analysis and Evaluation 


330 C Street, S.W. 

Washington, D. C. 20201 

Mary Kenesson 
Director, IMM 
Medicaid Bureau 
330 C Street, S.W. 
Washington, D. C. 20201 

Odis Kendrick 


330 Independence Avenue, S.W. 

Washington, D. C. 20024 

Philip Levin 


6401 Security Boulevard 

Baltimore, Maryland 21235 

Lawrence Levinson, Deputy Director 

Office of State Operations 


330 C Street, S.W. 

Washington, D. C. 20201 

Richard B. Lowe, III 

Deputy Inspector General Designee 

330 Independence Avenue, S.W. 
Washington, D. C. 20024 

Cindy Mo wry 

Systems Analyst, Systems Liaison 

Branch, Division of Information 

Systems, 0S0 
Medicaid Bureay, HCFA 
330 C Street, S.W. 
Washington, D. C. 20201 

John J. Mullen 

Acting Director 

Division of Information Systems 

330 C Street, S.W. 
Washington, D. C. 20201 

Donald Muse 

HCFA, Division of Beneficiary Studies 

10202 Kindley Court 

Gaithersburg, Maryland 20760 


Robert Nakamoto, Director 

Division of Information Systems 


330 C Street, S.W. 

Washington, D. C. 20201 

Edward L. Palder 
330 C Street, S.W. 
Washington, D. C. 20201 

Arthur Per gam 

Acting Director, CAP, 


330 C Street, S.W. 

Washington, D. C. 20201 

Vincent G. Powell 


6401 Security Boulevard 

Baltimore, Maryland 21235 

Arnold Rottman 

Program Analyst 


330 C Street, S.W. 

Washington, D. C. 20201 

Ronald Schwartz 

Deputy Assistant Inspector General 

330 Independence Avenue, S.W. 
Washington, D. C. 20024 



Richard M. Osborne 

Deputy Regional Administrator 

HCFA - Region I 

JFK Building 

Boston, Massachusetts 02203 

Art O'Leary 

Regional Medicaid Director 

Region II 


26 Federal Plaza 

New York, New York 10007 

Thelma Weiss 

Regional Medicaid Specialist 

Region III, HCFA 

3535 Market Street 

Philadelphia, Pennsylvania 19104 

Alexander Heslin 

Regional Computer Specialist 

Region IV, HCFA 

101 Marietta Suite 608 

Atlanta, Georgia 30323 

Mulik Sayeedi 

Computer Specialist 

HEW/ HCFA Region V 

175 W. Jackson Suite A-835 

Chicago, Illinois 60604 

Linda Scully 

Social Science Analyst 

HCFA/Medicaid/Regional Office 

Region V 

175 W. Jackson Suite A-835 

Chicago, Illinois 60604 

Martin D. Stanton 

Regional Medicaid Director 

Region V 

175 W. Jackson 

Chicago, Illinois 60604 

James A. Adams 

Regional Medicaid Director 

Region VI, HCFA 

1200 Main Tower 

Dallas, Texas 75202 

Frank E. Ditmore 
Branch Manager 
HEW, Audit /OIG 
Region VI, Box 143 
Austin, Texas 78767 

Herschell M. James 

Assistant Regional Audit Director 

HEW, Audit Agency 

Region VI 

Room 4E1, 1100 Commerce Street 

Dallas, Texas 75242 

Ken Laney 

Branch Manager 


Region VI 

6846 Van Gogh 

Baton Rouge, Louisiana 70806 

Larry Lawson 

Computer Specialist 


Region VI 

1200 Main Tower 

Dallas, Texas 75202 

J. D. Sconce 

Regional Administrator 


Region VI 

1200 Main Tower 

Dallas, Texas 75202 

William R. Stoffels 

HEW Audit Agency 

Region VI 

Room 226, Federal Building 

Cathedral Place 

Santa Fe, New Mexico 87501 

Bill Blake 

Regional Medicaid Director 
601 E. 12th Region VII 
Kansas City, Missouri 64106 

Gary Garrison 

Computer Specialist 

Region VII, HCFA 

601 E. 12th 

Kansas City, Missouri 64106 



Milton Anderson 

Director Division of Management 

Region VIII, HCFA 

19th and Stout 

Denver, Colorado 80294 

Richard E. Eaton 
Computer Systems Analyst 
Medicaid Bureau, HCFA 
Region VII 
1901 Stout Street 
Denver, Colorado 80294 

Rob Schween 

Program Analyst/Investigator 

DHEW/HCFA Office of Program 

Integrity, Region VIII 
Federal Office Building 
1901 Stout Street 
Denver, Colorado 80294 

Marion E. Skinner 



2720 S. Chase Way 

Denver, Colorado 80227 

Winston Barton 

Chief, MMIS Branch 

HCFA/Medicaid, Region IX 

50 UN Plaza 

San Francisco, California 94102 

Mary L. Canale 

DHEW, Medicaid, Region IX 

Information Systems Specialist 

100 Van Ness 

San Francisco, California 94102 

Maurice J. Lynch, Jr. 

Computer Systems Administrator 

Region X 

1321 2nd Avenue 

Seattle, Washington 98101 

L. E. Mooney 

Program Analyst 


Region X 

1321 2nd Avenue 

Seattle, Washington 98101 



Gray Arnold 

President, Consultec, Inc. 
6065 Roswell Road 
Atlanta, Georgia 30328 

A. W. Baird 

Consultant IBM Corporation 
10401 Fernwood Road 
Bethesda, Maryland 20034 

William James Bannon 
Bradford National Corporation 
1901 L Street, N.W. 
Washington, D. C. 20036 

Michael E. Bauer 
Consultant, ANACOMP, Inc. 
219 N. Senate Avenue 
Indianapolis, Indiana 46204 

Curtis E. Brannon 
Eastern Regional Manager 
Grumman Data Systems 
1800 Kent Street 
Arlington, Virginia 22209 

James Cannon 

Assistant Executive Director 

Utah Professional Review 

540 E. 5th South 
Salt Lake City, Utah 84102 

Garnetta Chiaramonte, R.N. 
Med Law Management Director 
1484 Prospect Avenue 
East Meadow, New York 11554 

Joseph F. Chiaramonte, M.D. 

Assisant to Director 

Medicaid Program - Fraud and Abuse 

Section - Nassau County 
730 S. Grove Street 
Freeport, New York 11520 

Jan Clausen 

New Mexico PSRO 

2650 Yale Blvd., S.E. . 

Albuquerque, New Mexico 87106 

Dan DeBusschere 

Manager MMIS Advanced Programs 

EDS Federal Corporation 

7171 Forest Lane 

Dallas, Texas 75230 

Jerome N. Deverman, Ph.D. 


Medical Data Systems 

P.O. Box 13225 

Albuquerque, New Mexico 87192 

Darryl Domonkos 



2650 Yale, S.E. 

Albuquerque, New Mexico 87106 

Gregory B. Durand 

Systems Analyst 

Dikewood Industries, Inc. 

1009 Bradbury, S.E. 

Albuquerque, New Mexico 87106 

John M. Emery 

Washington Representative 

Blue Cross and Blue Shield 

1700 Pennsylvania Avenue 
Washington, D.C. 20006 

M. James Errico 

Health Care Systems 

System Development Corporation 

7929 Westpark Drive 

McLean, Virginia 22101 

David E. Farrell 
Asst. Exec. Director NMPSRO 
2650 Yale Boulevard, N.E. 
Albuquerque, New Mexico 87106 

Robert J. Flanagan 

Senior Vice President 

Dikewood Ind., Inc. 

1009 Bradbury Drive, S.E. 

Albuquerque, New Mexico 87106 

Gerald G. Greenwald 
Director, Government Relations 
Blue Cross and Blue Shield 
840 N. Lake Shore Drive 
Chicago, Illinois 60611 

Bill Greer 

Medicaid Systems Project Manager 

Blue Cross and Blue Shield 

601 Gaines 

Little Rock, Arkansas 72203 


Kim Hagen 

Review Analyst, PSRO 

2650 Yale Boulevard 

Albuquerque, New Mexico 87108 

Jim Headrick 
Manager SUR RDS 
7171 Forest Lane 
Dallas, Texas 75230 

Jim Healy 

Manager, Ambulatory Review 

Systems, NMPSRO 
2650 Yale, S.E. 
Albuquerque, New Mexico 87106 

Joseph Hirschman 

General Manager 

Professional Health Research 

1633 Old Bayshore Highway 

Suite 205 

Burlingame, California 94010 

John F. Kasonic 


Kasonic & Associates, Inc. 

1101 Bank of California 

Seattle, Washington 98164 

H. W. Kinamon 

E.D.S. Federal Corporation 

7171 Forest Lane 

Dallas, Texas 75230 

David A. Lang 

Account Representative 

Sperry Univac 

Route 15 at Erford Road 

Harrisburg, Pennsylvania 17043 

Patricia Mcllvenna 

Problem Review Supervisor 


2650 Yale, S.E. 

Albuquerque, New Mexico 87106 

Arthur R. McKay 

Director, Government Services 

The Computer Company 

1905 Westmoreland Street 

Richmond, Virginia 23230 

Richard Martz 

Associate Consultec, Inc. 

6065 Roswell Road 

Atlanta, Georgia 30328 ^3 

Susan Mertes 


Pracon, Inc. 

10390 Democracy Lane 

Fairfax, Virginia 22030 

Richard Miller 

Pes tec Computer Corporation 

Manager - Federal Government 

2341 Jefferson Davis Highway 
Arlington, Virginia 22202 

Norman Nicholson 
Medicaid Accounts Manager 
Electronic Data Systems 
7171 Forest Lane 
Dallas, Texas 75230 

Gary R. Patenaude 

Director of Marketing 

Delphi Associates, Inc. 

12 New England Executive Park 

Burlington, Massachusetts 01803 

Scott Perry 

Industry Administrator - IBM 
10401 Fernwood Road 
Bethesda, Maryland 20034 

Gregory B. Purand 

Systems Analyst 

Dikewood Industries, Inc. 

1009 Bradbury, S.E. 

Albuquerque, New Mexico 87106 

Robert Reese 

Manager Human Resources 

Sperry Univac 

P.O. Box 500 

Blue Bell, Pennsylvania 

Ken Riedlinger 

Vice President, Government 

Contracts Division 
EDS Federal Corporation 
7171 Forest Lane 
Dallas, Texas 75230 

Judy Silveus 
Program Manager 
Optimum Systems, Inc. 
2801 Northwestern Parkway 
Santa Clara, California 95051 


Jayne Somers Joe Earl Young 

NMPSRO Program Director, MMIS 

2650 Yale Boulevard, S.E. EDS Federal 

Albuquerque, New Mexico 87106 4123 Gage Center Drive 

E.D.S. Federal Corporation 
Dolores J. Stammer Topeka, Kansas 66604 

Roche Laboratories /Health Economics 

Planning Manager 
Kingsland Street 
Nutley, New Jersey 07110 

Kathleen Sullivan 
Pracon, Inc. 
10390 Democracy Lane 
Fairfax, Virginia 22030 

Edwin H. Taylor 

Director, Corporate Marketing 

Anacomp, Inc. 

6161 Hillside Avenue 

Indianapolis, Indiana 46220 

Robert N. Trombly 


Delphi Associates, Inc. 

12 New England Executive Park 

Burlington, Massachusetts 01803 

Carol Walker 

Data Analyst NMPSRO 

2650 Yale, S.E. 

Albuquerque, New Mexico 87106 

Walter D. Wood 


Dikewood Industries, Inc. 

1009 Bradbury Drive, S.E. 

Albuquerque, New Mexico 87106 

Susan Lowell Woodson 
Systems Specialist NMPSRO 
2650 Yale Boulevard, S.E. 
Albuquerque, New Mexico 87106 

Robert Yoder 

Director, Health Systems Management 

Optimum Systems, Inc. 

2801 Northwestern Parkway 

Santa Clara, California 95051 

James F. Young 

E.D.S. Federal Corporation 

7171 Forest Lane 

Dallas, Texas 75230 


4 U. S. GOVERNMENT PRINTING OFFICE : 1979 620-010/4036 


3 BDT5 DDDDE7D1 7 


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